Long term capital gains tax question

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phatkev
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Long term capital gains tax question

Post by phatkev » Fri May 29, 2015 12:05 am

This is probably a very basic tax question that I just don't know.

This is going to be my first time I can afford to put some additional money into my taxable account. I'm investing in a spartan index fund in my fidelity account. Initially, I put in a $10K investment and then each month I plan to invest a little into the same fund. If I cash out some money in a little over a year, how will I get taxed? Some will have been invested for greater than 1 year, so it should be long-term capital gains, but some of it will not be in for over a year. How is that figured out?

Thanks for the help.

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LAlearning
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Re: Long term capital gains tax question

Post by LAlearning » Fri May 29, 2015 12:06 am

regular income.
I know nothing!

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phatkev
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Re: Long term capital gains tax question

Post by phatkev » Fri May 29, 2015 12:17 am

LAlearning wrote:regular income.
Then in what situation does long term capital gains tax come into play?

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BL
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Re: Long term capital gains tax question

Post by BL » Fri May 29, 2015 12:31 am

The portion you have held for over a year is taxed at LTCG rates and the other is short term. If you don't plan to keep it longer than a year it shouldn't be invested at all, but kept in bank or money market.

You can choose the basis method as Specific Id, then you can pick and choose which lots to sell.

JimInIllinois
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Re: Long term capital gains tax question

Post by JimInIllinois » Fri May 29, 2015 12:34 am

By default your sale will use FIFO (first in first out) accounting, so the oldest shares will be sold first, resulting in a long-term gain (or loss). See http://www.bogleheads.org/wiki/Cost_basis_methods

Gill
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Re: Long term capital gains tax question

Post by Gill » Fri May 29, 2015 5:28 am

LAlearning wrote:regular income.
Not helpful or correct. See BL's response above. There's no such tax term as "regular income".
Gill

MarkS
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Re: Long term capital gains tax question

Post by MarkS » Fri May 29, 2015 5:50 am

You need to educate yourself about Cost Basis methods in general. A great place to start is the Wiki linked above by JimInIllinois.

Hope this helps.

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phatkev
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Re: Long term capital gains tax question

Post by phatkev » Mon Jun 01, 2015 10:05 pm

Thanks everyone. This was just the help I needed.

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