Neus wrote: ↑
Fri Mar 09, 2018 11:38 pm
2. Yes i believe there is a way to wash the unrealized capital gain by being temporary permanent resident on capital gain tax free country, but not sure yet. But this is not abut me. This is about general bogleheads investment strategy and i see that a US person will pays 20% rate for long term capital gain, don't anyone think 20% is huge and want to avoid it? Especially at longer year when unrealized capital gain is getting huge.
4. I see, thanks for the info. I'll look further into options and futures. It's nice to have options without having to liquidate especially when the market is on 10 years bull run. But i think this will be against bogleheads principle of market timing/guessing.
For #2, of course we all want to minimize the cap gains. For US citizens, there are a lot of things you can do.
- First, the long term (more than 1 year) cap. gains tax is actually graduated. 20% only applies to people with very high incomes. For most of us mere mortals the rate would be 15%, and for fairly low incomes (less than ~ $80,000 for a couple) the cap. gains tax is 0%. Note that you only pay the 15/20% for income above the threshold, so if you had ~$81,000 in cap gains and no other income, you'd only pay 15% on the $1,000 over the threshold - $150 total. So one can avoid a lot of the cap gains tax by spreading out the sales over several years.
- The second thing is that if your account is set up properly, you have different tax lots. Each lot will represent an individual purchase of shares, and will have it's own gains. So if you have to sell, you pick the lots with the least gain. If I needed to pull out $10,000 I would pick a lot for 2017 with a 5% gain (tax = ~$10,000*0.05*0.15 = $75) rather than one from 2009 with a 300% gain (tax = ~$10,000*0.75*0.15 = $1,125). A lot of people end up donating the shares with the 300% gains to a charity and selling less appreciated shares for income.
- Finally, if I'm paying a lot of cap. gains, it probably means I have a lot of income. All things being equal, I'd much rather be in a high-income, high tax situation than to run out of money.
I don't know how the specific tax laws are for Indonesian citizens. You might find someone who knows here if you put the key terms (capital gains taxes for an Indonesian living in the US) in the title of a thread, but you'll likely need to search for a group that has a lot of people in a similar positions to find the best solution.
For #4, I don't think ED is recommending you invest in options and futures, but just offering an example of how you could capitalize if you *knew* (i.e., you're a time traveler from the future) the market was going to drop. I would strongly recommend against it myself.