Author Topic: how to decide which funds to withdrawl from vanguard brokerage  (Read 691 times)

texxan1

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I always hear first in first out, but im not sure how all the tax implications and such actually works.

So i have 1.4m in my vanguard brokerage account... mostly in Vtsax and i want to withdrawl 200k and put it in my savings account for a business deal coming up in the next few weeks... Im just unsure how to do it where it costs me the least amount in capital gains etc.   in theory, if i do this business deal i can write it all off the first year, so in theory i wont have taxes this year but still want to make sure im doing this right.. This is the first time ive ever takan money out of any of my accounts lol... Great at saving, no good at spending lol

Thanks for the help

Tex

secondcor521

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Re: how to decide which funds to withdrawl from vanguard brokerage
« Reply #1 on: June 25, 2021, 07:56:38 AM »
First, it may not be the most tax beneficial move to realize the least in capital gains.  Whether it is or is not depends on the rest of your tax picture this year (and possibly future years).

Second, Vanguard has different settings for which shares are sold in situations where you have bought shares of the same mutual fund at different times and prices.  Personally I use specific ID, but there are others.

Third, if you want to minimize capital gains, the solution is generally straightforward:  Sell the shares that you purchased more than a year ago (in order to get long term capital gains instead of short term capital gains) that have the highest cost basis.  Vanguard will show this information to you when you go through the selling process on their website.  If you happen to have shares you bought less than a year ago that have a capital loss, those would be even better to sell by your requested metric.  However, remember that capital losses can only offset capital gains and up to $3,000 per year of ordinary income, so if you had a large capital loss it might end up being carried forward to future years, which may or may not be what you want.

MustacheAndaHalf

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Re: how to decide which funds to withdrawl from vanguard brokerage
« Reply #2 on: June 25, 2021, 08:22:42 AM »
So i have 1.4m in my vanguard brokerage account... mostly in Vtsax and i want to withdrawl 200k and put it in my savings account for a business deal coming up in the next few weeks...
When you login to Vanguard, at the top of the screen should be a menu called "Accounts".  Click that and select "Cost Basis".  You should now be on a screen that shows a summary of your total gain/loss for each asset.

Under VTSAX should be "Show Details" which you can click on to show every purchase you've made of VTSAX: how much you paid, and when you made the purchase.  If you want to put off taxes as long as possible, then you want the highest price that is over 1 year old.  The highest price you paid means the lowest gains since that price.  You should be able to find $200k worth of VTSAX there you can sell.

For you or others reading this who might prefer simplicity, Vanguard has a "highest in, first out" (HIFO) method for picking what to sell.  It can't consider short-term vs long-term without knowing your tax bracket, so it will make mistakes there.  But for holdings that are all short term (365 days or less) or all long term (held 366+ days), it should work fine.

texxan1

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Re: how to decide which funds to withdrawl from vanguard brokerage
« Reply #3 on: June 26, 2021, 04:24:09 PM »
Thanks for the responses.. I figured out how to do it via yalls help... still dont understand alot about the tax part, but this year im going for a loss... As im buying a business where i can write off the entire purchase price since its primarily equipment and i FIRED a few months ago with a rather large severence so this should help me offset all taxes for the year.

Thanks again, i never thought when i started dumping fire hoses of cash in vanguard that i would be taking any out this early lol

Thanks

Tex