How To Avoid Capital Gains Tax   Leave a comment

Recall that when you sell an asset, you owe capital gains taxes on the difference between your cost basis and the sale price. There are, however, at least three ways capital gains taxes can be avoided (I’m sure there may be more, but these are the ones I am aware of)

  • If the asset is a stock, mutual fund, or ETF, and you’ve held it for at least a year, and you are in the 0% long term capital gains bracket, you don’t owe any tax on the sale. Of course, this requires you to be in the 0% long term capital gains bracket, which you may not be.
  • Donate the stock, mutual fund, or ETF to charity. Of course, this is only really beneficial if you were going to donate anyway.
  • Leave the asset to your heirs in your will. Neither your estate nor the heirs will owe any capital gains taxes.

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Posted January 25, 2015 by Fiby in Uncategorized

Best Bank Accounts   Leave a comment

I thought I’d take a bit of a break from investing and taxes to discuss what I think are the best bank accounts.

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Posted January 24, 2015 by Fiby in Uncategorized

Do Your Taxes Yourself   Leave a comment

[I updated an earlier post on IRAs to mention one of the most important characteristics of Roth IRAs – early withdrawal of contributions without penalties or taxes].

Almost all Americans should do their taxes themselves. Many people just have wage income and some bank interest, which is incredibly simple to file. Some people all capital gains and qualified dividends to that, which isn’t that much harder. A couple of tax credits can get hairy, but for the most part, people should do their taxes themselves, by hand, without any software. Now I do recommend using software to check your work (so long as you can find free software that will handle your tax situation). But you should do it by yourself by hand first. I have two major reasons for this recommendation

  1. If you just mindless answer the questions asked by tax software, you don’t learn the tax code, which means you can’t plan ahead
  2. You can outsmart the tax software and get a better refund. I’ve done this before, and will continue to do this for every single year I am a graduate student.

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Posted January 23, 2015 by Fiby in Uncategorized

The 529 Tax Loophole (only for those who pay for educational expenses)   Leave a comment

This post is only relevant to people who are currently or anticipate paying for educational expenses, whether the expenses are for themselves or a family member.

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Posted January 22, 2015 by Fiby in Uncategorized

Target Date Funds and Tax Efficient Asset Placement   Leave a comment

Back in my post on what funds I invest in, I said that you should not just blindly follow my fund selection, one of the reasons being you should take into consideration retirement accounts. Certain assets should, generally speaking, be held in a retirement account instead of a taxable account. I think I’ll motivate this with a discussion of target date funds.

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Posted January 21, 2015 by Fiby in Uncategorized

Obamacare, the Thorn in the Roth Pipeline Strategy   Leave a comment

I’m going to keep this post short, because Harry Sit explains this quite well. Recall that a way to withdraw money before 59.5 from a Traditional 401k or IRA is to convert the funds to a Roth IRA. When you do this, the conversion amount gets reported as income for that tax year. The unfortunate problem with this approach in light of Obamacare is that if you buy health insurance from the marketplace and thereby could qualify to get a federal tax credit for health insurance, your, tax credit decreases with a rise in income. Hence, you could end up increasing your taxes more than you might initially expect. Check out Harry Sit’s post at The Finance Buff to read up on the details. Keep in mind he tends to use numbers for a married couple, not single people.

Posted January 20, 2015 by Fiby in Uncategorized

Insurance and Health Savings Accounts   Leave a comment

So I think I’ve wrapped up my discussion of retirement accounts. But there is one special account left to talk about: the health savings account (HSA). However, only those with a qualifying high deductible health plan can have a HSA. So I thought I’d first discuss insurance in general first.

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Posted January 19, 2015 by Fiby in Uncategorized