Author Topic: Tax Implications of Short Term Investing  (Read 363 times)

fixie

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Tax Implications of Short Term Investing
« on: July 28, 2019, 12:18:42 PM »
Hiya,
receiving a lump sum from home sale.  I may use the money to purchase a property in the next year(actively searching) and WAS going to just put it into a high interest savings account/s, but are there better places for such a large amount?(470k)

What are the tax implications of, for example, investing it in Vanguard Index funds for just 3 months to a year, then cashing out to purchase another property?

I AM going to hire a CPA this year, but was just wondering.  Any thoughts are welcome...
Thank you,
fixie

terran

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Re: Tax Implications of Short Term Investing
« Reply #1 on: July 28, 2019, 12:37:14 PM »
If it's worth more than what you invest then you'll tax on the difference calculated at your marginal tax rate for earned income (unlike long term gains which are taxed at more favorable long term capital gains rates). If it's worth less than what you invest then it will reduce other gains you may have first, and anything left over can reduce your taxable income by up to $3k. Any leftover losses will roll over to the following year.

Investing money you need in 3 months in stock is not a good idea. Anything you need in less than 5 years really shouldn't be in stocks. What happens if this $470k isn't all available in 3 months? Can you leave it invested at that point, or will you need to sell it regardless of what the markets are doing? If it's no longer worth $470k, will you be able to do what you want in 3 months?

marble_faun

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Re: Tax Implications of Short Term Investing
« Reply #2 on: July 28, 2019, 04:50:35 PM »
If you put the money in index funds, planning to use it in a year or less, you would be extremely vulnerable to short-term declines in the stock market.

Why not look at money market funds?

SeattleCPA

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Re: Tax Implications of Short Term Investing
« Reply #3 on: August 14, 2019, 07:25:06 AM »
If you put the money in index funds, planning to use it in a year or less, you would be extremely vulnerable to short-term declines in the stock market.

Why not look at money market funds?

+1

Also this comment offered not to be critical but to be constructive: You may need to deepen your understanding of financial risk.