Halp Taxable Investment Accounts: UF fo you have them?

fly

omg
Oct 1, 2004
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Steam
mattressfish
So based on a couple of blogs that I've been reading lately, I've come to the conclusion that April and I need some taxable investment accounts. Something that we can eventually draw out of before we turn 65 and can use our 401k/Roth/SS.

This is a somewhat new venture for us/me. Does anyone here do this already? If so, a couple of questions..

How does it really work as far as taxes?
Do I just pay capital gains taxes on my earnings at the end of the year?
Are there easy ways to minimize my taxes?
Anything else I should be worried about?
 

Casper

Bobbert Cheapstein
Oct 6, 2009
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So based on a couple of blogs that I've been reading lately, I've come to the conclusion that April and I need some taxable investment accounts. Something that we can eventually draw out of before we turn 65 and can use our 401k/Roth/SS.

This is a somewhat new venture for us/me. Does anyone here do this already? If so, a couple of questions..

How does it really work as far as taxes?
Do I just pay capital gains taxes on my earnings at the end of the year?
Are there easy ways to minimize my taxes?
Anything else I should be worried about?

Investments held for less than 1 year are taxed as regular income. Investments held longer than 1 year are taxed at the long term capital gains tax rate.

If you realize a significant capital gain mid-year, you may have to pay estimated tax on it, or incur a penalty at the end of the fiscal year.

Many people minimize their taxes by selling their losing investments at the end of the year. Beware though, if you buy the security back within 30 days, it's considered a wash sale and the realized loss cannot be used to offset your gains.

Some tax preparers ream you if your Form 8949 is long. I have heard of some of them charging as much as $5 per line item.
 

fly

omg
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mattressfish
Investments held for less than 1 year are taxed as regular income. Investments held longer than 1 year are taxed at the long term capital gains tax rate.

If you realize a significant capital gain mid-year, you may have to pay estimated tax on it, or incur a penalty at the end of the fiscal year.

Many people minimize their taxes by selling their losing investments at the end of the year. Beware though, if you buy the security back within 30 days, it's considered a wash sale and the realized loss cannot be used to offset your gains.

Some tax preparers ream you if your Form 8949 is long. I have heard of some of them charging as much as $5 per line item.

Thanks. A couple more based off this reply:

Is it worth churning investments a little to prevent owning for more than a year? (I assume the capital gains tax rate is higher.)

I don't think I'd have 'significant' gains mid year, as I'd be investing in relatively low volatility index funds. However, what is 'significant'?

Generally, I'd want to do some sort of rebalance yearly. Since I'd probably want to buy more of whatever I lost money in, could I do that after 31 days, or does the IRS frown on that?
 

Coqui

Piccolo Pete
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Thanks. A couple more based off this reply:

Is it worth churning investments a little to prevent owning for more than a year? (I assume the capital gains tax rate is higher.)

I don't think I'd have 'significant' gains mid year, as I'd be investing in relatively low volatility index funds. However, what is 'significant'?

Generally, I'd want to do some sort of rebalance yearly. Since I'd probably want to buy more of whatever I lost money in, could I do that after 31 days, or does the IRS frown on that?

Tax Rate on Short-Term Capital Gains
Capital gain income from assets held one year or less is taxed at the ordinary income tax rates in effect for the year, ranging from 10% to 35%.

Tax Rate on Long-Term Capital Gains
Capital gain income from assets held longer than one year are generally taxed at a special long-term capital gains rate. The rate that applies depends on which ordinary income tax bracket you fall under.
•Zero percent rate if your total income (including capital gain income) places you in the ten or fifteen percent tax brackets.
•15% rate if your total income (including capital gain income) places you in the twenty-five percent tax bracket or higher.
 

Casper

Bobbert Cheapstein
Oct 6, 2009
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Thanks. A couple more based off this reply:

Is it worth churning investments a little to prevent owning for more than a year? (I assume the capital gains tax rate is higher.)

I don't think I'd have 'significant' gains mid year, as I'd be investing in relatively low volatility index funds. However, what is 'significant'?

Generally, I'd want to do some sort of rebalance yearly. Since I'd probably want to buy more of whatever I lost money in, could I do that after 31 days, or does the IRS frown on that?

The long term CG tax is usually lower. That is to encourage investment over trading.

You probably need to pay estimated taxes if your end of the year taxes are going to be higher than $1,000. The penalty is basically an interest payment. The IRS basically treats it as if you had a paycheck and didn't pay your taxes out of it until the end of the year.

After 30 days, you can buy back and the IRS doesn't care.
 

fly

omg
Oct 1, 2004
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mattressfish
@Casper, so I just read this:

Always keep your international funds in taxable accounts. Foreign taxes are still taxes but they offset US taxes you would otherwise pay. If you are going to have any foreign investments then it is better to have them in taxable accounts.

Do you own any international stocks/funds? If so, can you explain this? Why would I be paying foreign taxes? :confused:
 
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fly

omg
Oct 1, 2004
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mattressfish
So I just setup a new taxable account with Vanguard! The problem is that now I probably need to rebalance everything, even though I just did that in January. :hs:
 

Sarcasmo

A Taste Of Honey Fluff Boy
Mar 28, 2005
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1.6 mil in a Milliman account + 325k in a 401k. Also four Maseratis in the garage (stacked on top of each other) and like 30 navy blue suits in the guest room closet.
 

Domon

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I found 10 dollars under my shoe on my porch doormat a week ago.

Folded up like a crane.

I have no idea who left it there.