Author Topic: Taxable Brokerage Accounts  (Read 623 times)

ColoradoSaving

  • 5 O'Clock Shadow
  • *
  • Posts: 12
Taxable Brokerage Accounts
« on: May 17, 2019, 08:35:22 PM »
Question:

So I know that you can withdraw up to the beginning of the 22% tax bracket without having to pay capital gains of ny kind. This rule essentially makes the taxable account act like a Roth without a contribution limit, but a withdrawal limit.

When you sell shares of an index fund or withdraw dividend gains from the taxable account does this count as income?

Or can I make $39,000 and withdraw as much as I want from a taxable account and not have to pay capital gains?

If these do count as income, then that would make these accounts very immobile. So you would only ever want to buy funds you can always stay with, such as VTSAX and VFIAX, because selling amounts over $40,000 would create taxable events.

chasesfish

  • Magnum Stache
  • ******
  • Posts: 2992
  • Age: 37
  • Location: Texas
    • Years in the making, I created a journal!
Re: Taxable Brokerage Accounts
« Reply #1 on: May 18, 2019, 06:14:30 AM »
I want to try to respond, but I'm confused by the term "withdraw"

In a regular brokerage account, withdrawing doesn't mean anything.  Its your after-tax money that goes in so you can take it out at any time.

Your holdings will generate dividends which could create a tax liability depending on your rate and the type of dividend.

If you buy a stock and it goes up, when you sell it then a capital gain is created.

Gin1984

  • Magnum Stache
  • ******
  • Posts: 4700
Re: Taxable Brokerage Accounts
« Reply #2 on: May 18, 2019, 06:18:08 AM »
Also keep in mind many states tax dividends and capital gains so you will pay tax if you live in those states.

HipGnosis

  • Handlebar Stache
  • *****
  • Posts: 1585
Re: Taxable Brokerage Accounts
« Reply #3 on: May 18, 2019, 06:40:22 AM »
Withdrawing funds from a taxable account is not income, so it's not a taxable event.
Selling shares is taxable (if you had a gain) is taxable, whether you withdraw or not.
Dividends are income, not capital gain, whether you withdraw or not.

ColoradoSaving

  • 5 O'Clock Shadow
  • *
  • Posts: 12
Re: Taxable Brokerage Accounts
« Reply #4 on: May 19, 2019, 12:38:11 AM »
Withdrawing funds from a taxable account is not income, so it's not a taxable event.
Selling shares is taxable (if you had a gain) is taxable, whether you withdraw or not.
Dividends are income, not capital gain, whether you withdraw or not.

This attachment shows what has me confused. It says income up to $38,600 for a single person (this may be a previous year) does not incur a capital gains tax.

So if I were invested in an all stock growth fund, and sold shares as I went, but did not exceed that number, would I not incur capital gains taxes?

So it sounds like selling shares does show as income, so it would count towards this number correct?

EvenSteven

  • Stubble
  • **
  • Posts: 148
  • Location: St. Louis
Re: Taxable Brokerage Accounts
« Reply #5 on: May 19, 2019, 07:04:28 AM »
Withdrawing funds from a taxable account is not income, so it's not a taxable event.
Selling shares is taxable (if you had a gain) is taxable, whether you withdraw or not.
Dividends are income, not capital gain, whether you withdraw or not.

This attachment shows what has me confused. It says income up to $38,600 for a single person (this may be a previous year) does not incur a capital gains tax.

So if I were invested in an all stock growth fund, and sold shares as I went, but did not exceed that number, would I not incur capital gains taxes?

So it sounds like selling shares does show as income, so it would count towards this number correct?

Selling shares from a taxable brokerage doesn't count as income, but it does generate capital gains, which I think is the thing you are trying to look at here. What you sold for minus what you paid for it equals the capital gain. When you sell, only the capital gain is subject to tax and counts towards your AGI.

cchrissyy

  • Pencil Stache
  • ****
  • Posts: 729
  • Location: SF Bay Area
Re: Taxable Brokerage Accounts
« Reply #6 on: May 19, 2019, 10:08:19 AM »
if you buy a share for $100 and later you sell it for $105, the gain is $5. that $5 is all that counts towards the income on your chart.

(edit to add a bigger example)

if you bought $100k of stocks or mutual funds several years ago and now it's worth $135k and you sell it all, the gain is $35k and it all fits in the 0% long term capital gains tax rate for a single person. 


if you bought $100k of stocks or mutual funds several years ago and now it's worth $150k and you sell it all, the gain is $50k, $38600 fits in 0% long term capital gains tax rate and $11400 would fall into 15% tax. 


these examples are very basic and ignore the possibility you have income from any other source. they also don't show you buying and selling at multiple points in time. I just hope this makes the overall concept clear.
« Last Edit: May 19, 2019, 10:17:25 AM by cchrissyy »

Catbert

  • Handlebar Stache
  • *****
  • Posts: 1670
  • Location: Southern California
Re: Taxable Brokerage Accounts
« Reply #7 on: May 19, 2019, 12:53:40 PM »
What I think you're missing is that the 36K 0% cap gains includes both the capital gain AND taxable income.  So...if you have no other income you could take 36K in capital gains.  But if you had 35K in taxable income (income minus standard deduction, etc.) then you could only take 1K in capital gains tax free.

ColoradoSaving

  • 5 O'Clock Shadow
  • *
  • Posts: 12
Re: Taxable Brokerage Accounts
« Reply #8 on: May 19, 2019, 10:54:50 PM »
if you buy a share for $100 and later you sell it for $105, the gain is $5. that $5 is all that counts towards the income on your chart.

(edit to add a bigger example)

if you bought $100k of stocks or mutual funds several years ago and now it's worth $135k and you sell it all, the gain is $35k and it all fits in the 0% long term capital gains tax rate for a single person. 


if you bought $100k of stocks or mutual funds several years ago and now it's worth $150k and you sell it all, the gain is $50k, $38600 fits in 0% long term capital gains tax rate and $11400 would fall into 15% tax. 


these examples are very basic and ignore the possibility you have income from any other source. they also don't show you buying and selling at multiple points in time. I just hope this makes the overall concept clear.

Ok that makes sense, thank you!