Tax advice for selling stock
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Tax advice for selling stock
I currently have a large stock loss that I'd like to use to reduce some positions where I have a significant gain. I have a particular stock I'd like to sell with multiple lots, some at a significant gain and others much less. I'm currently in the highest tax bracket, but expect it'll be lower next year (though unsure exactly where).
With that knowledge and knowing that Biden is trying to move the LT cap gains rate up, I'm trying to determine if it makes more sense to sell the stock lots with higher cap gains or lower. Assuming that LT cap gains will likely rise, it seems like you'd want to take advantage of the current (lower) tax rates to sell stock with a larger gains, which would also help maximize use of the loss. Am I thinking about this correctly? Would appreciate any advice.
With that knowledge and knowing that Biden is trying to move the LT cap gains rate up, I'm trying to determine if it makes more sense to sell the stock lots with higher cap gains or lower. Assuming that LT cap gains will likely rise, it seems like you'd want to take advantage of the current (lower) tax rates to sell stock with a larger gains, which would also help maximize use of the loss. Am I thinking about this correctly? Would appreciate any advice.
Re: Tax advice for selling stock
You should sell your losers tomorrow. Or did you mean that you already sold all your losers?
As for the rest of it, I would not jump to conclusions.
As for the rest of it, I would not jump to conclusions.
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Re: Tax advice for selling stock
Thanks - sorry, I should've clarified, I've already sold the loser and want to use the loss to offset some gains against a position I want to reduce. Just trying to optimize the tax strategy on it.
Re: Tax advice for selling stock
You can sell your win in the future and still use those losses to offset it, but you will have longer to decide. Losses over 3k (if you do not have gains this year) carry over. Losses up to 3k offset ordinary income (if no cap gains to offset first)investorhead wrote: ↑Wed May 05, 2021 8:27 pm Thanks - sorry, I should've clarified, I've already sold the loser and want to use the loss to offset some gains against a position I want to reduce. Just trying to optimize the tax strategy on it.
Re: Tax advice for selling stock
I would sell the tax lots with the least gain. Why realize more gain than necessary regardless of your projection of future tax law.
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Gill
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Re: Tax advice for selling stock
You should sell the shares with the smallest capital gain, regardless of what is happening to your capital-gains tax rate. The reason is that, for a given amount of gain, you can sell more shares now, and thus reduce future gains.
For example, suppose the stock is worth $100 and you bought 1000 shares at $40 and 2000 shares at $70. You can sell all the shares bought at $40 for a $60K capital gain, or all the shares bought at $70. If you sell all the shares bought at $70, you have half as many shares left for future years to accumulate more capital gains before you sell them, and twice as much money to reinvest in whatever you consider appropriate.
For example, suppose the stock is worth $100 and you bought 1000 shares at $40 and 2000 shares at $70. You can sell all the shares bought at $40 for a $60K capital gain, or all the shares bought at $70. If you sell all the shares bought at $70, you have half as many shares left for future years to accumulate more capital gains before you sell them, and twice as much money to reinvest in whatever you consider appropriate.
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Re: Tax advice for selling stock
Thanks, this always trips me up. Is there ever a time where it's wiser to sell shares with a larger gain before shares with less gain? What about if you knew the LT cap gains tax was going to increase, wouldn't it be better to capture more gain and pay less taxes on it if possible? Sorry if I'm missing something...
What if you believe (obviously no way to know) that the stock will continue to go up, would it make more sense to maintain more shares in that scenario? Or would you argue that scenario doesn't make sense because you can't predict what a stock will do?grabiner wrote: ↑Wed May 05, 2021 8:42 pm You should sell the shares with the smallest capital gain, regardless of what is happening to your capital-gains tax rate. The reason is that, for a given amount of gain, you can sell more shares now, and thus reduce future gains.
For example, suppose the stock is worth $100 and you bought 1000 shares at $40 and 2000 shares at $70. You can sell all the shares bought at $40 for a $60K capital gain, or all the shares bought at $70. If you sell all the shares bought at $70, you have half as many shares left for future years to accumulate more capital gains before you sell them, and twice as much money to reinvest in whatever you consider appropriate.
Re: Tax advice for selling stock
It is never better to sell shares with the larger gain, even when you are tax gain harvesting (taking capital gains this year to reduce future capital gains which will be taxed at a higher rate); see below.investorhead wrote: ↑Wed May 05, 2021 10:11 pmThanks, this always trips me up. Is there ever a time where it's wiser to sell shares with a larger gain before shares with less gain? What about if you knew the LT cap gains tax was going to increase, wouldn't it be better to capture more gain and pay less taxes on it if possible? Sorry if I'm missing something...
One exception: it may be better to take a larger long-term gain rather than a smaller short-term gain.
Suppose you are tax gain harvesting; in that case, you can buy back as many shares as you sold.investorhead wrote:What if you believe (obviously no way to know) that the stock will continue to go up, would it make more sense to maintain more shares in that scenario? Or would you argue that scenario doesn't make sense because you can't predict what a stock will do?grabiner wrote: ↑Wed May 05, 2021 8:42 pm You should sell the shares with the smallest capital gain, regardless of what is happening to your capital-gains tax rate. The reason is that, for a given amount of gain, you can sell more shares now, and thus reduce future gains.
For example, suppose the stock is worth $100 and you bought 1000 shares at $40 and 2000 shares at $70. You can sell all the shares bought at $40 for a $60K capital gain, or all the shares bought at $70. If you sell all the shares bought at $70, you have half as many shares left for future years to accumulate more capital gains before you sell them, and twice as much money to reinvest in whatever you consider appropriate.
If you sell 1000 shares bought at $40, you now have 1000 shares with a $100 basis and 2000 shares with a $70 basis.
If you sell 2000 shares bought at $70, you now have 2000 shares with a $100 basis and 1000 shares with a $40 basis. This is better, as you can now sell 2000 shares rather than 1000 with no tax cost. If you hold for future years, you will have the same tax bill if you sell all the shares, or at most 1000 shares, but a lower tax bill if you sell more than 1000 shares.
Re: Tax advice for selling stock
This thread is now in the Personal Finance (Not Investing) forum (taxes).
The whole point of the policy is to (1) eliminate contentious disagreements that result from these discussions and (2) keep investors from making bad decisions. Proposed legislation changes many times between the time it's introduced and signed into law.
The best approach is to make your decision about current law. When the law changes, make your decision at that time.
For the record, speculation about future legislation is prohibited by forum policy, see: Unacceptable Topicsinvestorhead wrote: ↑Wed May 05, 2021 8:22 pm With that knowledge and knowing that Biden is trying to move the LT cap gains rate up, I'm trying to determine if it makes more sense to sell the stock lots with higher cap gains or lower. Assuming that LT cap gains will likely rise, it seems like you'd want to take advantage of the current (lower) tax rates to sell stock with a larger gains, which would also help maximize use of the loss. Am I thinking about this correctly? Would appreciate any advice.
This forum is focused on investing that is directly actionable to personal investors. We don't hold debates on conjecture.Politics and Religion
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The whole point of the policy is to (1) eliminate contentious disagreements that result from these discussions and (2) keep investors from making bad decisions. Proposed legislation changes many times between the time it's introduced and signed into law.
The best approach is to make your decision about current law. When the law changes, make your decision at that time.
Re: Tax advice for selling stock
What are you trying to accomplish with the stock you want to sell? If there were no tax considerations, what would you do?
Speculating on future tax law changes is not allowed here. But, if you do want to speculate in your own life, please make sure you get accurate information about what is being proposed/discussed.
Speculating on future tax law changes is not allowed here. But, if you do want to speculate in your own life, please make sure you get accurate information about what is being proposed/discussed.