Managing Tax Issues

[MakeMe$$$$]

In the past, my rather small investments didn't create a huge tax issue. I was able to manage tax payments through additional payroll taxes.

I'm starting to have a more significant amount of money invested. It isn't a crazy amount of cash in the market but enough that by the end of CY 18 I could see (I HOPE ) a larger tax bill then I've had in the past.

I'm not opposed to continuing my past practice of additional payroll deductions. I suppose I could use quarterly methods too.

Anyway...your thoughts/suggestions?

[Snapdragon]

I'm curious to suggestions also, other than selling losing stock.

[mjedlin66]

Just don't sell anything. No capital gains.

[mindofmush]

Take a look at the Mad Fientist's take on Tax-Loss Harvesting

https://www.madfientist.com/tax-loss-harvesting/

and more fun with Tax-Gain Harvesting

https://www.madfientist.com/tax-gain-harvesting/

[crondanet5]

I have described myself to both Fidwlirt and Merrill Lynch as a Daily Trader. One completed trade, thousand shares, bought and sold. That generates capital gains. Wish I had enough capital gains to pay off the national debt. But here's the sweet spot: every night I try to be in cash. That would make settling my estate easier for my wife. So, whatever the capital gains taxes are, I pay. And the rest is mine. In cash.

This does not mean you cannot own stock for a longer period of time. Just remember to follow the share price charts. They tell you when to sell and when to buy. Remember that nobody gets hurt taking a profit. Hire a tax accountant to do your capital gains tax calculations. The cost is tax deductible.

How is the motorhome?

[MakeMe$$$$]

I have described myself to both Fidwlirt and Merrill Lynch as a Daily Trader. One completed trade, thousand shares, bought and sold. That generates capital gains. Wish I had enough capital gains to pay off the national debt. But here's the sweet spot: every night I try to be in cash. That would make settling my estate easier for my wife. So, whatever the capital gains taxes are, I pay. And the rest is mine. In cash.

This does not mean you cannot own stock for a longer period of time. Just remember to follow the share price charts. They tell you when to sell and when to buy. Remember that nobody gets hurt taking a profit. Hire a tax accountant to do your capital gains tax calculations. The cost is tax deductible.

How is the motorhome?

At this time I am not even close to a daily trader. But...for simplicity sake I'm kinda like you on the gains will be what they are and tax will be what it is. I do see some good info on the harvesting losses as being practical.

The coach is doing great. We just settled into Yuma, AZ for the winter. More time to concentrate on my strategies.

[evilanne]

Aren't short term capital gains taxed as ordinary income? https://www.investopedia.com/articles/p ... -rates.asp

Income from Municipal Bonds doesn't have any federal tax impact (States income tax rules vary on Muni's)

You can increase your withholding on your pay, retirement or Social Security check(s). I need to figure my taxes by end of year to see whether or not I need to submit payment for this year to avoid penalty. You can avoid the penalty as long as you don't owe more than $1,000 or certain percentages of current/prior year taxes, whichever is lower https://www.irs.gov/taxtopics/tc306

[MakeMe$$$$]

Aren't short term capital gains taxed as ordinary income? https://www.investopedia.com/articles/p ... -rates.asp

Income from Municipal Bonds doesn't have any federal tax impact (States income tax rules vary on Muni's)

You can increase your withholding on your pay, retirement or Social Security check(s). I need to figure my taxes by end of year to see whether or not I need to submit payment for this year to avoid penalty. You can avoid the penalty as long as you don't owe more than $1,000 or certain percentages of current/prior year taxes, whichever is lower https://www.irs.gov/taxtopics/tc306

I use "Sector Surfer" http://www.sumgrowth.com/default.aspx to manage my Fidelity holdings. For the vast majority of strategies holdings don't reach "long term" status for the lower tax rate. As you suggest, in the past I've just increased my payroll/retirement withholdings to cover those taxes. Currently one of my major holdings is a municipal bonds fund so I'm familiar with that tax advantage.

Now that I have a steady flow of funds being added to my investments I do expect to see some situations where I can "harvest losses" but that remains to be seen. OTOH...if my strategies do a good job...short term taxes...here I come. LOL

Currently we are SD residents so there is not state income tax on any of my earnings. That could change in 4-5 years but I will start a new thread on that subject.

[mindofmush]

The Tax System is complex because it's social engineering, it is designed to manipulate the behavior of select groups in the population.

Investors holding a stock longer stabilizes the stock market, so the System offers those investors a premium with lower taxes for long-term capital gains. Same idea for qualified dividends: hold a dividend paying stock for more than 60 days and your benefit is the lower capital gains tax rate.

It is interesting that if you can reduce your AGI (Adjusted Gross Income) into the 15% tax bracket that the long term capital gains tax rate = 0%, no tax owed on selling stock/ETF held for more than a year and no tax on qualified dividends received that year.

Never change your investment plan to fit the tax code but knowledge of the tax code can improve decisions when selecting a plan.

[TopNotch]

Does your broker offer advisory or financial planning services? I've never used these but it might be worth looking into.

[Joshuador]

I figured I got hosed Usps to the BC border was only 20...that is understandable. We have 13 tax here. I have to order it from Ken, cause I cant find much of these goodies in Canada.