Sell taxable to increase basis?

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deecee
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Joined: Wed Aug 13, 2014 9:27 am

Sell taxable to increase basis?

Post by deecee » Sun Aug 19, 2018 12:20 pm

Does it make sense to sell shares in a taxable account for a gain and buy back into the same fund to increase the cost basis? I recently heard this on a podcast. The speaker is in the 0% cap gains tax bracket. Assuming you can avoid income tax in this transaction, is there any dowside to stepping up your basis? Thanks.

Goal33
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Re: Sell taxable at higher basis?

Post by Goal33 » Sun Aug 19, 2018 12:22 pm

CA taxes capital gains at ordinary income.

There might be some income based benefits you receive... maybe this would push you out of that band?

Seems like it depends on your circumstances. I think some people do it here.
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TomatoTomahto
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Re: Sell taxable to increase basis?

Post by TomatoTomahto » Sun Aug 19, 2018 12:32 pm

I believe that’s called Tax Gain Harvesting, the other side of the Tax Loss Harvesting coin.

drk
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Re: Sell taxable to increase basis?

Post by drk » Sun Aug 19, 2018 12:33 pm

TomatoTomahto beat me to it. Check out the wiki article on tax-gain harvesting.

Lars_2013
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Re: Sell taxable to increase basis?

Post by Lars_2013 » Sun Aug 19, 2018 1:40 pm

drk wrote:
Sun Aug 19, 2018 12:33 pm
TomatoTomahto beat me to it. Check out the wiki article on tax-gain harvesting.
Looks like that article needs some updating for the new tax law. Rather than saying "Up to the top of the 15% bracket, in order to take advantage of the 0% capital gains tax rate for this bracket" it should say something like "Up to the top of the 0% long-term capital gains tax bracket, which is similar to the top of the 12% ordinary income tax bracket."

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Earl Lemongrab
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Re: Sell taxable to increase basis?

Post by Earl Lemongrab » Sun Aug 19, 2018 3:32 pm

Don't forget about qualified dividends. If the person has significant taxable holdings, then those should issuing be dividends. Those share that same 0% space as capital gains. In my case, even though I have a fair amount of clearance over my ordinary income, it's already fully used by dividends.
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