Taxes #

Selling Stock #

Selling stock at a gain is a taxable event. If you’ve held the stock for < 1 year, it is taxed as ordinary income; otherwise it is taxed at a lower capital gains rate. This Motley Fool page has a good explanation with examples.

Note that your capital gains themselves help determine your capital gains tax rate. If you make no ordinary income, but sell stock resulting in a $1 million gain, your income for the purposes of determining your capital gains tax rate will be $1 million. You will not pay ordinary income tax on this amount, but instead the 20% (in 2021) capital gains tax rate for this income level.

If you are making significant capital gains over the year and are not offsetting this amount by for example having your employer withhold more tax, you must pay taxes quarterly to the IRS here. If you do not, you may need to pay an underpayment pentalty when it comes time to file your tax return.

Optimizing Capital Gains When Retired #

If you are retired and need < ~$40k per year to live (in 2021), you could survive by selling < ~$40k of stock per year (which should definitely have < ~$40k of capital gains) and pay 0% capital gains tax.

Tax Loss Harvesting #

Good descriptions:

• https://hackyourwealth.com/tax-loss-gain-harvesting
• https://www.moneyunder30.com/profit-from-tax-loss-harvesting
• https://www.madfientist.com/tax-loss-harvesting/

1. Sell your losing investment.
2. Buy another (intermediate) investment that you are happy holding.
3. If you want, sell your intermediate investment and buy back your original

   30 days after the original sale.

   • Make sure that your intermediate investment hasn’t gone up in value when you do this, otherwise you will cancel out your losses!

Probably a good strategy is to, when the market is falling, set a reminder to sell all losing shares and buy a similar investment twice a week. This way you will be sure to get the maximum losses and won’t miss the bottom.

Tax Gain Harvesting #

Useful if you are in the 0% capital gains tax bracket:

• https://www.madfientist.com/tax-gain-harvesting/

Tax Return Filing #

https://tpc-marriage-calculator.urban.org/ is a good resource for checking if filing jointly when married is a good idea.

https://www.freetaxusa.com/ is a great service for actually filing taxes.

Deducting Housing Expenses #

Things to deduct for a rental property:

• Mortgage interest
• Insurance
• Depreciation
• Large capital improvements (via “safe harbor” law for small landlords)

Categories: Investing And Finances