An HSA is distinct from a HDHP, you can keep the former without keeping the latter (the rules requiring a HDHP are only about making contributions). When you closed it, was it already empty from withdrawing eligible medical expenses?
Search found 2411 matches
- Wed Mar 27, 2024 12:46 pm
- Forum: Personal Finance (Not Investing)
- Topic: HSA contributions of 2022 resulting in additional tax now
- Replies: 16
- Views: 1442
Re: HSA contributions of 2022 resulting in additional tax now
- Wed Mar 27, 2024 8:13 am
- Forum: Personal Consumer Issues
- Topic: Kindle Users--Please help
- Replies: 24
- Views: 1402
Re: Kindle Users--Please help
The Kindle app, even on non Amazon devices, can push ad notifications depending on your settings. Is this what we're talking about?
- Wed Mar 27, 2024 8:01 am
- Forum: Personal Finance (Not Investing)
- Topic: Understanding advantages of ESPP qualifying disposition status, when is waiting to sell worth the risk
- Replies: 8
- Views: 464
Re: Understanding advantages of ESPP qualifying disposition status, when is waiting to sell worth the risk
Via look back your company is offering you stock for way below market rate. Are you certain that the discount due to look back redefines your basis and is not just counted as ordinary income? In a qualifying disposition (at least 2 years from grant date and long term sale if in a qualifying plan), only the discount from the lookback price is taxed as ordinary income instead of the entire difference between fair market value and price paid. OP, I think it can make sense if the gain is large like in your case and I've done it. One way I think about it is how far the stock can fall and you still come out ahead. You have a big advantage against the average investor, so it makes sense to hold even when you generally wouldn't want to hold indivi...
- Wed Mar 27, 2024 6:48 am
- Forum: Personal Finance (Not Investing)
- Topic: HSA contributions of 2022 resulting in additional tax now
- Replies: 16
- Views: 1442
Re: HSA contributions of 2022 resulting in additional tax now
Did your spouse have an FSA in 2022?
Why did you close your HSA? Did you have medical expenses for all funds?
Did you file your 2022 taxes using the last month rule?
Did you earn any interest or investment return on the money in your HSA before you had the excesscontributuon returned?
Why did you close your HSA? Did you have medical expenses for all funds?
Did you file your 2022 taxes using the last month rule?
Did you earn any interest or investment return on the money in your HSA before you had the excesscontributuon returned?
- Sun Mar 24, 2024 8:12 pm
- Forum: Personal Consumer Issues
- Topic: To buy or not to buy a big SUV
- Replies: 42
- Views: 3492
Re: To buy or not to buy a big SUV
I assume it would be used the rest of the time, it's just more car than is needed.
BorqaZ, I would factor this in. How much extra will it cost to own an operate compared to what you would own otherwise? Subtract renting cost. Is that worth the convenience and safety of knowing what you have to drive on your trips?
- Thu Mar 21, 2024 6:15 am
- Forum: Personal Finance (Not Investing)
- Topic: Overfunded 529 - how to leverage while in PHD
- Replies: 4
- Views: 641
Re: Overfunded 529 - how to leverage while in PHD
There still is tuition for PhD students, it's just often covered in some way. Shouldn't this be the scholarship scenario for a 529, where you can take that money out penalty free but not tax free?arcane wrote: ↑Wed Mar 20, 2024 2:17 pm I have same question for my daughter, and she will enroll a PHD program this fall, and there is some money in her 529 account.
I think this question was discussed before as viewtopic.php?t=304217
I think the agreement is that the room/board plus all education expense (excluding tuition, as PHD candidate won't pay that) can be reimbursed from 529.
Any stipends beyond PHD tuition is subject to Tax, if it is reimbursed from 529
- Tue Mar 19, 2024 7:02 am
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
Yes, these are instructions to taxpayers, but they are describing the responsibilities of brokers ! Do you not believe what they wrote in Pub. 550? Are you really having difficulties comprehending this? It's not that I don't believe what they wrote, it's just that it's a different object. I don't know of there's some nuance lost. (Also, the IRS says you can't rely on their publications.) But fine, I'll just accept this as correctly and completely describing the brokers' responsibility, at least for the purposes of discussion here. If brokers routinely do not report wash sales in circumstances described by the OP — with covered shares of identical securities in the same account — that's a very strong indication that the brokers' lawyers hav...
- Mon Mar 18, 2024 8:00 pm
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
And none of the different ways it was explained there clicked with you, either? I was hoping something might. I know I've had mental blocks in understanding tax rules and the text of IRS publications when a literal interpretation seems, to me, to conflict with standard practice and widespread understanding. So I definitely sympathize with your perspective. But when everyone else in a thread starts trying different ways of explaining that I'm wrong, I usually have no choice but to at least consider the possibility that I might be wrong. The issue is not that I do not understand the other positions, so explaining it in a different way is not an issue. I don't see a basis in law or rulings for why it is not a wash sale. I'm looking for the un...
- Mon Mar 18, 2024 6:50 pm
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
The conclusion from combining 56-602 and 71-316 is that there is a wash sale if there are shares remaining after a loss sale that were purchased within the wash sale period, unless the only remaining shares purchased within the wash sale period are from the same lot as those sold in the loss sale. I agree with that conclusion, assuming you mean 'if' and not 'if and only if'. But there are many other possible extrapolations that fit those two data points, including: - there's only a wash sale when the purchased shares are purchased earlier if the loss sale was from shares purchased on margin -the only (relevant) exception to the wash sale is when the shares are purchased as one lot -the reasoning in 56-602 doesn't apply in years that have a...
- Mon Mar 18, 2024 12:17 pm
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
The conclusion from combining 56-602 and 71-316 is that there is a wash sale if there are shares remaining after a loss sale that were purchased within the wash sale period, unless the only remaining shares purchased within the wash sale period are from the same lot as those sold in the loss sale. I agree with that conclusion, assuming you mean 'if' and not 'if and only if'. But there are many other possible extrapolations that fit those two data points, including: - there's only a wash sale when the purchased shares are purchased earlier if the loss sale was from shares purchased on margin -the only (relevant) exception to the wash sale is when the shares are purchased as one lot -the reasoning in 56-602 doesn't apply in years that have a...
- Sun Mar 17, 2024 9:32 pm
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
- Sun Mar 17, 2024 7:50 pm
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
As for me, I agree wholeheartedly with rkhusky: The correct answer is so obvious that even Kaye Thomas — who takes such great care to make confusing circumstances clear even for wash sale novices — didn't think the case warranted any explanation. Where does he opine on OP's scenario? He doesn't. That's my point. If he thought it warranted an explanation, I assume he would have provided another example or discussed the variation in one of the five examples he did provide. Frankly, it's not a close call. Did you check out the link to that other forum? Notice any familiar explanations? Ah, got it. I don't read that much into a particular case not being included. (Though I could argue that it could also not be included because it's complicated...
- Sun Mar 17, 2024 7:44 pm
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
You'd make the exact same argument about the situation in the example in RR 71-316 if that ruling did not exist, would you not? I would. And, in the absence of 56-602, you would say that the example there was a wash sale too, since a purchase was made within the wash sale window that was not sold. ... Yes, but the difference is 56-602 gives a specific exception to the general rule. 56-602 does not create a broad exception with the example in 71-316 as a specific example. I see no conflict between the rulings. Instead, 71-316 shows us that while the IRS may see a class of exceptions that include 56-602 (which I agree is almost certain) we don't have a way of knowing what that class is because we don't know why the example in 71-316 is not i...
- Sun Mar 17, 2024 7:02 pm
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
Where does he opine on OP's scenario?
- Sun Mar 17, 2024 6:59 pm
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
I agree its holding is not relevant to the OP scenario.FactualFran wrote: ↑Sun Mar 17, 2024 3:27 pm ...Because the sequence of transactions in the option post do not involve a purchase on margin, ruling 71-316 is irrelevant to the opening post.
...
Where it is relevant to the thread is in showing that we cannot apply the reasoning used to justify the holding in 56-602 to all other scenarios because that reasoning also applies to the example given in 71-316, but it is described as a wash sale there.
- Sun Mar 17, 2024 1:53 pm
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
The same reasoning can be applied to other situations, or are you going to insist that the IRS has to address every single situation separately, with no interpolations allowed? No, I am not insisting that. The IRS could issue a broad guidance or a general rule. It has not done so. The law could also be updated. The reasoning in the RR might be able to be applied to other scenarios, but we do not know the bounds of it because the ruling was about that particular scenario. If we followed the same reasoning, we would think the example in RR 71-316 would come out the other way. Thus, we know that reasoning to be unreliable. I want to distinguish between two positions: 1) the same reasoning in RR 56-602 could be used to argue the OP's scenario ...
- Sun Mar 17, 2024 8:48 am
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
The same reasoning can be applied to other situations, or are you going to insist that the IRS has to address every single situation separately, with no interpolations allowed? No, I am not insisting that. The IRS could issue a broad guidance or a general rule. It has not done so. The law could also be updated. The reasoning in the RR might be able to be applied to other scenarios, but we do not know the bounds of it because the ruling was about that particular scenario. If we followed the same reasoning, we would think the example in RR 71-316 would come out the other way. Thus, we know that reasoning to be unreliable. I want to distinguish between two positions: 1) the same reasoning in RR 56-602 could be used to argue the OP's scenario ...
- Sun Mar 17, 2024 7:27 am
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
AnEngineer, you seem to be the only person in this thread who interprets the law the way you do. Are there others who have expressed that thought in the past? Have you found any opinions from lawyers or the government or any other authority that support your thinking? Or is it just your thinking? I don't mean that in the snide way it might sound in print. I'm interested in whether you came to this conclusion on your own by your reading of the law, or if there are some authorities out there that you may have learned this thinking from. To expand on my earlier answer, I found the following documents expressing doubt in interpreting the wash sale rule in such contexts when looking for the proper text of RR 56-602. KayeThomas_CostBasisRegsComm...
- Sat Mar 16, 2024 10:12 pm
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
AnEngineer, you seem to be the only person in this thread who interprets the law the way you do. Are there others who have expressed that thought in the past? Have you found any opinions from lawyers or the government or any other authority that support your thinking? Or is it just your thinking? I don't mean that in the snide way it might sound in print. I'm interested in whether you came to this conclusion on your own by your reading of the law, or if there are some authorities out there that you may have learned this thinking from. To expand on my earlier answer, I found the following documents expressing doubt in interpreting the wash sale rule in such contexts when looking for the proper text of RR 56-602. KayeThomas_CostBasisRegsComm...
- Sat Mar 16, 2024 10:12 pm
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
I come to my conclusions by applying 26 U.S. Code § 1091(a) And disregarding all other information on the law from Congress and the IRS, as well as tax experts and brokerage legal staffs. If there's anything that covers the OP's scenario, I'm open to hear it. Nothing has been provided. The expectation that every scenario must be specifically addressed in the law or in IRS rulings or in court opinions, without any interpolation allowed, is completely unrealistic. I have no such expectation. I expect the general rule to apply unless there's an exception that covers the situation at hand. An exception could be broad or narrow. If you have a scenario that you think should be an exception, you're welcome to try to fight it in court. Until then,...
- Sat Mar 16, 2024 1:17 pm
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
I come to my conclusions by applying 26 U.S. Code § 1091(a) And disregarding all other information on the law from Congress and the IRS, as well as tax experts and brokerage legal staffs. If there's anything that covers the OP's scenario, I'm open to hear it. Nothing has been provided. The expectation that every scenario must be specifically addressed in the law or in IRS rulings or in court opinions, without any interpolation allowed, is completely unrealistic. I have no such expectation. I expect the general rule to apply unless there's an exception that covers the situation at hand. An exception could be broad or narrow. If you have a scenario that you think should be an exception, you're welcome to try to fight it in court. Until then,...
- Sat Mar 16, 2024 11:22 am
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
AnEngineer, you seem to be the only person in this thread who interprets the law the way you do. Are there others who have expressed that thought in the past? Have you found any opinions from lawyers or the government or any other authority that support your thinking? Or is it just your thinking? I don't mean that in the snide way it might sound in print. I'm interested in whether you came to this conclusion on your own by your reading of the law, or if there are some authorities out there that you may have learned this thinking from. I am aware of no authority or expert who has opined in either way on the OP's scenario. I come to my conclusions by applying 26 U.S. Code § 1091(a) https://www.law.cornell.edu/uscode/text/26/1091 : (a)Disallo...
- Sat Mar 16, 2024 11:14 am
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
- Sat Mar 16, 2024 10:38 am
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
I don't see the OP's situation in the linked list of examples. Your interpretation would lead to Example 2 being a wash sale, in contradiction to the IRS 56-602 ruling. In the absence of 56-602 yes. But the ruling exists; it's an exception. Maybe there will be more exceptions (or there are others that we don't know about), but we don't get to make up exceptions because we think it's against the intent. But my point there was that it doesn't make sense to use Thomas in an appeal to authority if he doesn't address this situation and you wouldn't follow him in similar situations. The reasoning is exactly the same in both cases. And if the IRS can use Congressional intent, so can tax professionals and taxpayers. The IRS is empowered to make su...
- Sat Mar 16, 2024 10:30 am
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
In the absence of 56-602 yes. But the ruling exists; it's an exception. Maybe there will be more exceptions (or there are others that we don't know about), but we don't get to make up exceptions because we think it's against the intent.rkhusky wrote: ↑Sat Mar 16, 2024 10:20 amYour interpretation would lead to Example 2 being a wash sale, in contradiction to the IRS 56-602 ruling.AnEngineer wrote: ↑Sat Mar 16, 2024 10:13 am I don't see the OP's situation in the linked list of examples.
But my point there was that it doesn't make sense to use Thomas in an appeal to authority if he doesn't address this situation and you wouldn't follow him in similar situations.
- Sat Mar 16, 2024 10:13 am
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
I’m not in the habit of asking professionals, like my doctor, to justify their advice by asking for citations and a seminar on the underlying science. I usually ask why when given advice, so I have some better sense of it, particularly the bounds in which it applies. Especially in cases, like this one, where I have good reason to believe it does not apply to my situation. A doctor is an interesting example, because I think everyone can think of recent examples of doctors giving public advice that they think is ridiculous and thus completely ignored (because of the wide range of opinions being given on the same topics). But we have no wide range of opinions on this. We have a noted expert and the professionals that work for brokerages all o...
- Sat Mar 16, 2024 8:26 am
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
I’m not in the habit of asking professionals, like my doctor, to justify their advice by asking for citations and a seminar on the underlying science. I usually ask why when given advice, so I have some better sense of it, particularly the bounds in which it applies. Especially in cases, like this one, where I have good reason to believe it does not apply to my situation. A doctor is an interesting example, because I think everyone can think of recent examples of doctors giving public advice that they think is ridiculous and thus completely ignored (because of the wide range of opinions being given on the same topics). But we have no wide range of opinions on this. We have a noted expert and the professionals that work for brokerages all o...
- Sat Mar 16, 2024 8:20 am
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
Yes, brokerages have different rules, and here are the specifics: Nondeductible wash sale loss. If you received a Form 1099-B, box 1g will show the amount of wash sale loss disallowed if: • The stock or securities sold were covered securities, and • The substantially identical stock or securities you bought had the same CUSIP numbers as the stock or securities you sold and were bought in the same account as the stock or securities you sold. However, you cannot deduct a loss from a wash sale even if it is not reported on Form 1099-B. So while it's true that brokers don't have to report some wash sales, assuming the transactions met the two conditions above, this wouldn't be the kind of wash sale they could fail to report. So if it's true th...
- Fri Mar 15, 2024 10:33 pm
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
I usually ask why when given advice, so I have some better sense of it, particularly the bounds in which it applies. Especially in cases, like this one, where I have good reason to believe it does not apply to my situation. A doctor is an interesting example, because I think everyone can think of recent examples of doctors giving public advice that they think is ridiculous and thus completely ignored (because of the wide range of opinions being given on the same topics).
- Fri Mar 15, 2024 8:12 pm
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
This is specifically about whether the other shares in that lot cause a wash sale. It says nothing about a wash sale being caused by a separate purchase.FactualFran wrote: ↑Fri Mar 15, 2024 8:04 pm There is Revenue Ruling 56-602. The ruling is that selling a portion of a purchase lot for a loss within 30 days of the purchase is not a wash sale.
- Fri Mar 15, 2024 8:09 pm
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
We rely on authorities all the time - CPA’s, engineers, doctors, lawyers, etc. I find their expertise to be valuable. I agree. I'd love to hear from an expert on this as to where I'm right or wrong. Here you go. Kaye Thomas, founder of fairmark.com (https://fairmark.com/about/) and of Fairmark Press. Tax attorney with a law degree from Harvard. Wash sales are not caused by shares you no longer own, because they are not replacement shares for the shares that you sold at a loss. See: https://fairmark.com/investment-taxation/capital-gain/wash/wash-sales-and-replacement-stock/ That's just pronouncement that openly disagrees with the IRS. If I'm wrong, which I don't think I am, there'd be a reason that's somewhere in the law or some court rulin...
- Fri Mar 15, 2024 4:30 pm
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
- Fri Mar 15, 2024 3:20 pm
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
Hi, I read some notes on wash sale. I still confused about the determinatiion of the wash sale. Even all ChatGPT, Gemini gave different answers, can anyone share your knowledge on this? Here is a case I'm confused. 1. On March 3, 2021, you purchased 100 shares at $30 per share. 2. Two weeks later (approximately March 17, 2021), you sold all 100 shares at $31 per share, realizing a gain. 3. 5 days after the sale (approximately March 22, 2021), you repurchased 200 shares at $32 per share. 4. 7 days after the purchase (approximately March 29, 2021), you sold the 200 shares at $28 per share, realizing a loss. 5. on March 30, I don't have any stock as I sold all those on March 29. Can I claim the loss or duct losses from sales for tax loss purp...
- Fri Mar 15, 2024 12:10 pm
- Forum: Personal Investments
- Topic: Questions on Wash Sale?
- Replies: 71
- Views: 4256
Re: Questions on Wash Sale?
Hi, I read some notes on wash sale. I still confused about the determinatiion of the wash sale. Even all ChatGPT, Gemini gave different answers, can anyone share your knowledge on this? Here is a case I'm confused. 1. On March 3, 2021, you purchased 100 shares at $30 per share. 2. Two weeks later (approximately March 17, 2021), you sold all 100 shares at $31 per share, realizing a gain. 3. 5 days after the sale (approximately March 22, 2021), you repurchased 200 shares at $32 per share. 4. 7 days after the purchase (approximately March 29, 2021), you sold the 200 shares at $28 per share, realizing a loss. 5. on March 30, I don't have any stock as I sold all those on March 29. Can I claim the loss or duct losses from sales for tax loss purp...
- Tue Feb 27, 2024 10:21 pm
- Forum: Personal Investments
- Topic: 12% Bracket-Roth vs. Traditional
- Replies: 35
- Views: 4258
- Mon Feb 26, 2024 9:45 pm
- Forum: Personal Investments
- Topic: 12% Bracket-Roth vs. Traditional
- Replies: 35
- Views: 4258
Re: 12% Bracket-Roth vs. Traditional
Another consideration is if there's any tax gain harvesting that's worth doing that you might prefer to doing Roth. However, as you seem to be in 12% regardless of traditional vs. Roth and don't expect a large upswing in income, you may not leave 0% LTCG bracket.
Otherwise I go with the Roth sentiment due to the planned increased in tax rates. After rates go up, look at expected marginal tax rate in retirement based on all income sources.
Otherwise I go with the Roth sentiment due to the planned increased in tax rates. After rates go up, look at expected marginal tax rate in retirement based on all income sources.
- Sun Feb 25, 2024 11:11 am
- Forum: Personal Finance (Not Investing)
- Topic: Vehicle damaged and liable party has low coverage limits
- Replies: 45
- Views: 4121
Re: Vehicle damaged and liable party has low coverage limits
It's actually even simpler than that. Being involved in an accident is positively correlated with being in further accidents, therefore the cost to insure you goes up (in states that allow this). Could be your driving habits, could be the driving habits of the people in your area, maybe your local roads are simply more dangerous. All the insurance company cares about is that your risk has gone up regardless of the reason for it. In case someone is confused by the implication that being in a not at fault collision causes your risk to increase, I think it's more precise to say that because of the new information your insurance company reassesses how risky it is to insure you. They know more and can make a more targeted risk assessment.
- Sun Feb 25, 2024 9:05 am
- Forum: Personal Finance (Not Investing)
- Topic: Company division is being "Carved-Out"
- Replies: 17
- Views: 2542
Re: Company division is being "Carved-Out"
You probably can't get worthwhile answers until there's a solid plan.Mr-et-Mrs-R wrote: ↑Fri Feb 23, 2024 5:32 pm What sort of questions I should be asking; From benefits, RSUs & ESPP, 401(k), etc.
But on your side, consider if there are any benefits you want to take advantage of now that you might not have in the future. For example, if you have access to a Roth 401k or after-tax 401k that you use, you might want to front load that, as you might lose access even if employment is continuous. Similar with FSA.
- Sat Feb 17, 2024 9:54 pm
- Forum: Investing - Theory, News & General
- Topic: The One-Fund Portfolio as a default suggestion
- Replies: 904
- Views: 241979
Re: The One-Fund Portfolio as a default suggestion
In the first post, I've identified a series of flaws prevalent in arguments against using all-in-one funds and ETFs in all accounts, including taxable ones. In later posts, I've provided a mathematical proof that a mirrored asset allocation will never be the worst asset location strategy, as well as analyses explaining how "tax-efficient fund placement" is mostly a mirage as it silently increases portfolio risk. Forum member Exchme also explained why, mathematically, it's necessarily so. I'm very glad to have found this thread and the arguments. I find them very persuasive with regard to placement of funds in traditional vs. Roth accounts. However, I think your case is not as strong with regards to taxable accounts. When you are ...
- Sat Feb 10, 2024 6:57 am
- Forum: Personal Investments
- Topic: Is paying off a 2.99% mortgage always a bad idea?
- Replies: 332
- Views: 24979
Re: Is paying off a 2.99% mortgage always a bad idea?
I'm not sure what this debate is really about. There's the mathematical/financial aspect which is quantifiable. Conversely, there is the emotional aspect, i.e. you'll feel better paying it off; that is not quantifiable and doesn't apply to everyone, but it's not invalid. I think it is quantifiable to some degree. If it's not, then you should pay of the mortgage under all circumstances, even if it means you have to liquidate all investments to do so and take a tax hit. Even if you avoid other emotional decisions like leaving no emergency fund, I don't see anyone preferring to pay $100k in taxes to pay off a $300k mortgage at sub 3% rates. So then it becomes a question of how much you are willing to pay to do it. If you do the math and are o...
- Fri Feb 09, 2024 1:46 pm
- Forum: Personal Investments
- Topic: Is paying off a 2.99% mortgage always a bad idea?
- Replies: 332
- Views: 24979
Re: Is paying off a 2.99% mortgage always a bad idea?
I'd really lean towards heavily accelerating the payments with new investable cash. Kinda meets both goals. What hasn't been emphasized in this thread is that paying down your mortgage as you describe is worse than either paying it off or just investing (at similar risk). By putting money towards your mortgage but not paying it off you tie up your money at a low rate but have very low liquidity, as you have to get rid of the mortgage in one way or another to get that money back. However, you also still have your full mortgage payment, so you haven't reduced your expenses at all. Maybe you can recast your mortgage, but that just tempers the issue. They can always recast the mortgage in the future. Of course, if they move, they’ll likely be ...
- Wed Feb 07, 2024 6:26 pm
- Forum: Personal Investments
- Topic: Is paying off a 2.99% mortgage always a bad idea?
- Replies: 332
- Views: 24979
Re: Is paying off a 2.99% mortgage always a bad idea?
That's a pretty extreme assumption.ThankYouJack wrote: ↑Tue Feb 06, 2024 1:38 pm...
Lets say inflation averages 4% for those 30 years. ...
Yes, it's not gobs of money you spend to pay off the mortgage. Yet for a group that will note the cost of a 0.3% expense ratio or advising fee, it's hard to give up a free 0.5% rate difference after tax.
- Tue Feb 06, 2024 3:32 pm
- Forum: Personal Investments
- Topic: Is paying off a 2.99% mortgage always a bad idea?
- Replies: 332
- Views: 24979
Re: Is paying off a 2.99% mortgage always a bad idea?
This can't hurt you if you picked the right bond durations. That is, to match your mortgage payments. You know their value at maturity when you buy them.lakpr wrote: ↑Tue Feb 06, 2024 11:37 am+1
Notice also that KlangFool discounts bond market dropping at the same time of "coming recession", assumes that the bond market holds steady.
If we assume a 50% stocks drop and a 20% bond drop in the same year (2022!!!), I bet that the investor would be so wishing that they had secured their home first and eliminated the $10k monthly drag altogether. The negative bond of the mortgage still has the same bite, but the offsetting positive bond in the portfolio dropped 20% ..
- Tue Feb 06, 2024 3:31 pm
- Forum: Personal Investments
- Topic: Is paying off a 2.99% mortgage always a bad idea?
- Replies: 332
- Views: 24979
Re: Is paying off a 2.99% mortgage always a bad idea?
What hasn't been emphasized in this thread is that paying down your mortgage as you describe is worse than either paying it off or just investing (at similar risk). By putting money towards your mortgage but not paying it off you tie up your money at a low rate but have very low liquidity, as you have to get rid of the mortgage in one way or another to get that money back. However, you also still have your full mortgage payment, so you haven't reduced your expenses at all. Maybe you can recast your mortgage, but that just tempers the issue.
- Tue Feb 06, 2024 7:05 am
- Forum: Personal Investments
- Topic: ESPP and RSU Tax matter
- Replies: 9
- Views: 1181
Re: ESPP and RSU Tax matter
RSU: will show up on W2 as FMV on grant date. Usually some are sold for taxes also shown on W2. Cost basis is determined when you get them. 1099B will either show correct cost basis or not report cost basis (sort of looks like zero cost basis, but is different). Taxable as income when received, normal capital gains when sold. ESPP depends somewhat on whether the plan is qualified. If qualified, tax on discount is deferred until sale. If non-qualified, you pay regular income tax on discount based on purchase date. I believe in both cases, but at least for qualified plans, your 1099B is required by law to be incorrect, but your broker usually provides supplemental information to help. At least some of the discount is wage income and should ad...
- Wed Jan 31, 2024 2:22 pm
- Forum: Personal Finance (Not Investing)
- Topic: Roth conversions in the 22 & 24% tax brackets.
- Replies: 144
- Views: 14689
Re: Roth conversions in the 22 & 24% tax brackets.
The only thing that matters in the Roth vs traditional question is the tax rate, not length of time the money is in the account. One notable exception is if ordinary income taxes from a Roth conversion are paid from a taxable account. Unlike a tIRA, a taxable account has tax liability on reinvested dividends and growth beyond the initial cost basis which results in an increasing time benefit for the Roth. You can see the impact in the spreadsheet I posted here: https://www.bogleheads.org/forum/viewtopic.php?p=7685138#p7683456 I thought my SIL was foolish for converting ALL of their tIRAs to Roths using a large cash influx to pay the taxes many years ago. In retrospect, it may end up being a wise move. I wouldn’t call this an exception. If ...
- Mon Jan 29, 2024 7:15 pm
- Forum: Personal Investments
- Topic: Tax Efficient Strategy using Tax-deferred, Roth, and Taxable accounts
- Replies: 106
- Views: 12989
Re: Tax Efficient Strategy using Tax-deferred, Roth, and Taxable accounts
Consider a stock which pays no dividends, so that the IRS will take 15% of all capital gains when you sell. $10,000 in a taxable account in stock thus has the same risk as $8500 in a tax-free account; the taxable account will be worth $1500 more regardless of what happens to the stock market. I completely agree with your point. For the numbers to work out in this example, the cost basis of the stock must be zero. No, the cost basis is assumed to be $10,000 in this case, so that if you sell right now, you will have $10,000, versus the $8500 in the Roth. But it doesn't matter in the general principle of risk-equivalence; every dollar by which you reduce the basis reduces the after-tax value by a fixed 15 cents, no matter what happens to the ...
- Mon Jan 29, 2024 4:50 pm
- Forum: Personal Investments
- Topic: Tax Efficient Strategy using Tax-deferred, Roth, and Taxable accounts
- Replies: 106
- Views: 12989
Re: Tax Efficient Strategy using Tax-deferred, Roth, and Taxable accounts
If we stick to stocks and taxable bonds/cash, any location preference can be emulated by a mirrored portfolio (same stock bond allocation in all accounts), though generally the allocation is different between the “tax efficient” portfolio and the equivalent mirrored portfolio. It must be so by simple continuity - we know that with only stocks and bonds/cash, the maximum average return would be when we hold 100% of the higher yielding asset and at that point there is no difference between “tax efficient” and “mirrored”, so the same maximum is in reach either way. Similarly, holding 100% bonds/cash gives the lowest returns and that too is equal in both “tax efficient” and “mirrored”. Both mirrored and "tax efficient" must be able t...
- Mon Jan 29, 2024 7:13 am
- Forum: Personal Investments
- Topic: Tax Efficient Strategy using Tax-deferred, Roth, and Taxable accounts
- Replies: 106
- Views: 12989
Re: Tax Efficient Strategy using Tax-deferred, Roth, and Taxable accounts
I completely agree with your point.grabiner wrote: ↑Sun Jan 28, 2024 5:57 pm Consider a stock which pays no dividends, so that the IRS will take 15% of all capital gains when you sell. $10,000 in a taxable account in stock thus has the same risk as $8500 in a tax-free account; the taxable account will be worth $1500 more regardless of what happens to the stock market.
For the numbers to work out in this example, the cost basis of the stock must be zero.
- Sat Jan 27, 2024 9:32 pm
- Forum: Personal Investments
- Topic: Is paying off a 2.99% mortgage always a bad idea?
- Replies: 332
- Views: 24979
Re: Is paying off a 2.99% mortgage always a bad idea?
lakpr, Correction. I recommended OP's change his AA from 80/20 to 70/30 instead. KlangFool Sorry I meant "stock market" in a generic sense, not ONLY equities. Then again, OP has $1.4 million portfolio, 10% of it (decrease of equities percentage is from 80% to 70%) is $140k. Would you be fine if the OP proposed to eliminate exactly half his mortgage by selling equities? No. That is the worst possible option. It does nothing to reduce expense and it eliminates a large churn of his liquidity in the taxable account. Pay off the mortgage or do nothing to the mortgage. Only pay down or pay off the mortgage when you are financially independent. That is my position. KlangFool :) I am not surprised and expecting that reaction. With $1.1 m...