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Tax Strategies

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1 Tax Strategies on Mon Jun 01, 2015 7:56 am

Just a thread to discuss some tax strategies. Post your ideas below.

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2 Re: Tax Strategies on Mon Jun 01, 2015 8:00 am

One strategy that was discussed over in the UGAZ thread that will work pretty much for any scale in/scale out trading plan with any stock:

Was thinking of a tax advantageous strategy for trading these 3x funds that tend to cycle up and down. Just calculating my taxes on these, and it is starting to add up. Maybe buy 1st position (or first and 2nd) in my taxable account, then buy the later (lower priced) positions in my Roth IRA. Then when it goes back up, when I sell, I'll have higher profit margins in the Roth IRA then in the taxable account. Makes sense? It could actually work out so that I am making profits based on my average cost, but taking a paper loss in the taxable account. I'll think of an example and post later.

Simplified example, but say I purchase UGAZ at 2.50 and 2.25 in taxable account, $3000 each position. Then I purchase at $2 and 1.75 in my Roth IRA, $3000 each position. So my average cost is say 1.95 (I didn't pull out a calculator, just in my head math, probably around there). Then I sell on the way up at 2.20, 2.45 (taxable account positions), 2.70, and 2.95 (Roth IRA). So all of my sells are above my average cost, but I'll take a loss in my taxable account, and big gains in the Roth IRA.

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3 Re: Tax Strategies on Mon Jun 01, 2015 8:02 am

And of course tax loss and tax gain harvesting, which is very useful if it pulls you below the 15% tax bracket, since long term capital gains are 0% for those individuals, at least for now:

http://www.investopedia.com/terms/t/taxgainlossharvesting.asp

Note - highly useful for retirees.

If anyone wants me to elaborate on the benefits, let me know. It isn't as black and white as you would initially think.

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