274 | Tax Planning 2020 | Sean Mullaney
Topics covered
Popular Clips
Questions from this episode
- Asked by 34 people
Episode Highlights
Tax Gain Harvesting
Tax gain harvesting offers a unique opportunity for those in the financial independence community, especially during early retirement. explains that if you're in the 12% marginal federal income tax bracket or lower, you can sell stocks like Apple, recognize a capital gain, and still pay 0% in federal taxes 1. This strategy allows you to reset your basis, potentially reducing future tax liabilities. However, it's important to consider state income taxes, as they may not be as favorable as federal rules 1.
You might just sell that Apple stock and do one of two things. You might say, Look, I want to be more diversified. I'm going to go buy an index fund.
---
This approach can be beneficial for diversifying your portfolio or simply resetting your basis without incurring federal taxes.
Tax Loss Harvesting
Tax loss harvesting involves selling securities at a loss to offset gains, but it requires careful adherence to the wash sale rule. highlights that this rule prevents repurchasing the same or similar securities within 30 days before or after the sale, which could disallow the loss 2. It's crucial to track transactions across different accounts to avoid complications during tax season.
Tax loss harvesting should be a tactic and not a goal. I don't believe you should set up your portfolio to tax loss harvesting.
---
Mullaney advises using tax loss harvesting selectively, focusing on total return and employing it only in years with significant losses 3.