Taxes
10 articles
How the rules work — holding periods, cost basis, wash sales, account types — described as mechanics. Nothing here is tax advice, and circumstances differ.
Foundations
Start here if the subject is new.Capital Gains, Short and Long
A realised gain is taxed at a rate that depends on how long the position was held. The boundary is one year, and it is frequently the largest single cost in a short-horizon method.
Qualified and Ordinary Dividends
Dividends are taxed at two different rate structures, and which one applies depends on the payer and on how long the shares were held around the ex-date.
Tax-Advantaged Accounts
The two structures defer tax at different ends. Which is preferable depends on rates now against rates later, which nobody knows.
Intermediate
Assumes the foundations above.Cost Basis Methods
When part of a position is sold, which shares were sold is a choice. The default is usually first-in first-out, and it is rarely a deliberate one.
Wash Sales
A loss is disallowed if a substantially identical security is bought within a window around the sale. The loss is not lost; it moves into the basis of the replacement.
Tax-Loss Harvesting
Realising a loss to offset a gain is a deferral rather than a saving, and the value of the deferral depends on the rate difference and on what is bought instead.
Required Minimum Distributions
Tax deferred is not tax forgiven. Traditional retirement accounts must begin distributing at a specified age, and the amount is set by a table rather than by choice.
K-1s and Partnership Structures
Some listed securities are partnerships rather than corporations. They report on a K-1 instead of a 1099, arrive late, and carry consequences that surprise holders.
Foreign Withholding on Dividends
A dividend from a foreign company is often taxed at source before it arrives. Whether any of it can be recovered depends on treaties and on the account it is held in.
State Considerations
Federal rules are only part of the picture. States tax investment income differently, and some securities are treated differently depending on where the holder lives.