Something I should have figured out before FI/RE!

[lifepopsicle]

So this is a basic thing I should have figured out before FI/RE, but I was so busy saving, I didn't even think about it...

When you sell shares of an after tax mutual fund (say, of VTSAX) how do you know which shares you are selling and how they impact taxes? For instance, I purchased funds regularly for the last 10 years, and obviously I have made far more gains on those shares than on ones that were purchased more recently, like last summer. So how are the gains determined that I would pay taxes on? I would potentially have a loss on shares purchased last July, so can I avoid taxes on withdrawals all together?

Please help me understand this! Thanks friends!

[ixtap]

It depends on your brokerage. If you are willing to share that information, you will get more useful responses.

[RWD]

Depends on your cost basis recordkeeping method. SpecId gives you the most control, see:
https://investor.vanguard.com/taxes/cost-basis/specific-identification
https://www.investopedia.com/terms/s/specific-share-identification.asp

[ThriftyD]

For most brokerages, FIFO (first in first out) is the default cost basis, meaning if you sell shares today, the cost basis will be from the first share purchased.  Sometimes 'average cost' is the default, too.  Most brokerages should allow you to select a different method if you so choose. 

[bacchi]

There are a couple of strategies you can use to minimize taxes, depending on income.

Watch out for the wash sale rule.

[MDM]

Depends on your cost basis recordkeeping method. SpecId gives you the most control, see:
https://investor.vanguard.com/taxes/cost-basis/specific-identification
https://www.investopedia.com/terms/s/specific-share-identification.asp

+1

There is no cost basis method that will give you better results than specific lot ID.

[lifepopsicle]

Thanks all. This is so helpful. Feeling less silly for not knowing this!