Withdrawing from taxable account question

[sighchological]

Hello all,

I’m thinking of selling from my taxable account, just have some questions. Thank you in advance!

I have set my taxable account as spec ID.

To use the following as an example in my taxable account. (VTSAX)
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Date acquired 06/27/2018

Shares owned: 442.012

Total cost: $29,999.32

Est. gain/loss (per share) 29,897.73 ($67.64)

Est. available proceeds: $59,897.05
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Would I be correct in the following:

1) If I want to take out $10,000, then I would sell approximately 74 shares at today’s $135 per share, and would be taxed around $5K ($67.64 x 74 shares).

2) On my 2024 taxes I would report income of $5K for long term gains.

3) I don’t have any current losses, but if there is the scenario when during the sell, I had some gains in one lot, and some losses in another lot, would the losses offset the gains? If so, how would I report this in my taxes?

Thank you!

[thismachine]

I'd recommend taking a look at IRS's Topic no. 409, Capital gains and losses.

Would I be correct in the following:

1) If I want to take out $10,000, then I would sell approximately 74 shares at today’s $135 per share, and would be taxed around $5K ($67.64 x 74 shares).

No, for several reasons.

First, today's (03 September) closing price was $132.56. $135.51 was Friday's close. You get the closing price of the day you execute. So if you had sold 74 shares today then you would receive $9,809.44

Second, you aren't taxed on all the gain, only a portion of the gain. The exact proportion depends on the holding period: less than a year is taxed at your ordinary income rate; more than a year is taxed a reduced rate (0%, 15%, or 20%, plus an additional 3.8% if you are subject to NIIT). (Plus your state tax, if applicable).

For a basic overview you might take a look at Engaging Data's Income Tax Visualization

You didn't mention your the holding period or your capital gains tax rate. Assuming more than a year with a long term rate of 15% and average cost basis of $67.87: you would only be taxed federally $718.06 = 15% * ($132.56 - $67.87) gain * 74 shares.

I have set my taxable account as spec ID.

Third, the above assumes average cost basis. The advantage of specific identification is that you can choose lots with more or less gain. See the wiki for more information

2) On my 2024 taxes I would report income of $5K for long term gains.

No, as above, you would pay less tax than all the gains.

You'll receive a Form 1099-B or a consolidated Form 1099 from your broker (e.g. Vanguard). You'll report the sale via Form 8949, Sales and other Dispositions of Capital Assets and the summary on Schedule D (Form 1040) (or really, your tax program will handle it).

3) I don’t have any current losses, but if there is the scenario when during the sell, I had some gains in one lot, and some losses in another lot, would the losses offset the gains? If so, how would I report this in my taxes?

Yes, losses offset gains. Your broker will probably report the net short term and long term gain/losses on the consolidated Form 1099 for all your sales with that broker.

Specifically, you summarize capital gains and deductible capital losses on Schedule D (Form 1040)

[FiveK]

Because this is one lot purchased > 1 year ago:
1) Yes on the approximate number of shares to sell, and yes to the $5K Long Term Capital Gain (not the tax you would owe).
2) Yes. The amount of tax that would incur depends on your other income.
3) Yes. See Schedule D. Do you do your taxes by hand or with tax software?

[rkhusky]

3) yes, unless you have a wash sale. When selling for a loss in a taxable account, you have to make sure you don’t buy any shares of that fund for the next 30 days nor have bought shares within 30 days before the sale, in any of your accounts. Sometimes wash sales aren’t a big deal and sometimes they are.
See https://www.bogleheads.org/wiki/Wash_sale