What can I do to help minimize my capital gains taxes?

[atn1kxf]

I currently have a brokerage account that I plan to either transfer the assets In-Kind or just sell / setup a new account at Vanguard.  All of the funds have been in the account longer than one year and my capital gains tax rate is 15%.  Based on my estimates, the capital gains tax due will be $6,326.12.  With that said, are there any capital gains avoidance strategies I can implement to help lower the taxes or should I just bite bullet and pay the bill?

[JGS1980]

I currently have a brokerage account that I plan to either transfer the assets In-Kind or just sell / setup a new account at Vanguard.  All of the funds have been in the account longer than one year and my capital gains tax rate is 15%.  Based on my estimates, the capital gains tax due will be $6,326.12.  With that said, are there any capital gains avoidance strategies I can implement to help lower the taxes or should I just bite bullet and pay the bill?

Hello, and Welcome to the Forum!

First, I would sell off the funs with minimal gains <$200 or <$600 just for simplicity's sake. Buy VTSAX or VFIAX per your preference.

Second, I would likely wait for a "TAX LOSS HARVESTING" opportunity to exchange the remainder of the funds. As the market has been on a tear, this may take a while. But be patient and this chance may come eventually. Remember that even if VTSAX drops for a bit in a year or two, that loss can be used to SHELTER exchanges of your clunker funds in the future. It will take a while to untangle those crappy funds if you want to avoid paying those 15% capital gains taxes.

Third, almost forgot. If your adjusted income ever gets below a certain threshold (40 K single, 80 K married filing jointly), then you won't have to pay any capital gains at all! This is how a lot of us aspirational FIRE folks plan to avoid paying the man in retirement.

Hope this helps,

JGS

[secondcor521]

^ Those are all good options.

If you donate to charity, what you can do is donate the appreciated mutual funds to charity.  As long as you have held the security longer than one year, then you get a charitable contribution deduction (probably not worth much nowadays, but still) for the full value of the stock, you avoid capital gains taxes, the charity sells the securities at essentially a stepped up basis.

You can then use the cash you didn't send to the charity to buy the new investments you want.

Most large charities are aware of this option and able to accept appreciated securities donations.

I am not sure if this type of donation qualifies for the new charitable contribution adjustment that appeared on tax forms for 2020 and will be there for 2021.

Probably google "donate appreciated stock to charity" for more details on this idea.

[atn1kxf]

I appreciate the great recommendations...  I believe I will implement the first recommendation now and sell my underperforming funds first; selling anything with a gain <$600.  I have (6) of these funds falling into this category with a current market Value: $55,844.15.  The total unrealized capital gains are: $2,202.53 and the tax (15%) will be $303.38; which is much better than $6k.  Once this is done, I will wait for an opportunity to consider implementing the tax loss harvesting process.

Thanks for the help

[JGS1980]

I appreciate the great recommendations...  I believe I will implement the first recommendation now and sell my underperforming funds first; selling anything with a gain <$600.  I have (6) of these funds falling into this category with a current market Value: $55,844.15.  The total unrealized capital gains are: $2,202.53 and the tax (15%) will be $303.38; which is much better than $6k.  Once this is done, I will wait for an opportunity to consider implementing the tax loss harvesting process.

Thanks for the help

I'm glad you will follow through with this. Note that TODAY appears to be a great day Tax Lost Harvest if this keeps up.

You appear new to MMM Forum. Have you recently "seen the light". What's your story?

[atn1kxf]

I'm a life long saver who has spent too many years working with commission-based advisors.  In hindsight, their recommendations were to buy investments that paid them high commissions.  Now that I have stumbled upon MMM, I need to keep reading, listening, and asking questions to learn as much as I can so I can take over the reins and control my own destiny.