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Financial Planning / Tax Strategies


Subject:  New Investor Tax Questions Date:  12/4/2020  8:33 AM
Author:  mcantrell Number:  131417 of 132483

Married filing jointly, household taxable income around 75K

1) In January 2020 I started a non-retirement investing account to learn more about the stock market and put some extra money in savings to work. To this point in the year, I have a realized loss of about $1,300. But an unrealized gain of around $9,000 and the total account sits at around $32,000 actively invested in stocks. In that account, I had about 4-5 stocks/ETFs that did have a very small realized gain and 7 stocks/ETF's that accounted for the overall realized loss. Will I be taxed at short term capital gains rates for those 4-5 holdings that did go up before selling before 1 year had passed? Or will that money be absorbed by the losses from a tax perspective?

2)When looking at selling or holding my non-retirement investments my understanding is that after 12 months of holding that I will be taxed at long-term capital gains rate of 15%. Is that correct?
What, for comparison sake, would be my short term capital gains tax rate? Would those taxes need to be paid in advance of 12/31/20 via estimated tax payments to the IRS? Or just taken out during the filing process?

3)About 3 years ago I rolled old work retirement money into a traditional IRA account and also we have been annually maxing out a Roth account for me and my wife with a financial advisor. I am looking at opening self-directed accounts for both and no longer working with the financial advisor. I am considering converting my traditional IRA into my Roth IRA. Currently, I have about $60,000 in my Traditional IRA. Does the amount I have contributed to the traditional IRA vs investment gains matter when determining tax implications for a rollover? Or do taxes simply relate to the total in the account at the time of the rollover? Would that rollover amount contribute to our overall income for the year? I am expecting we will be around the $75 - 80K mark for 2020 income between my wife and I. If I do the rollover I would just need to be careful to not push us up into the next bracket, correct? Is 80K the current cutoff for married filing jointly? What is the time frame for doing a conversion in 2020? Is it 12/31/20 or 4/15/21?

4)Would you recommend using some of my non-retirement investment money potentially to account for the taxes due because of the conversion? Would those payments need to be made via estimated tax payments to the IRS prior to April to avoid a tax penalty? Any other things to consider with that?

5)I have a 403B Roth Option through my work. Contributions to this must be made out of my income/monthly check. This year I have contributed about $4,200 which reduces our overall income a bit.
We will have some inheritance money coming within the next few months. Would you recommend maxing out 403B contributions from a tax and investment perspective? If we can survive income wise with that inheritance money for awhile I think that reducing our income level and maxing out our tax favored investing might be a good way to go. Do you agree? Anything I should consider or watch out for with that plan? My understanding is that the inheritance income is not taxed and is considered a gift, is that correct?

6)We started a 529 account for our daughter when she was born. Due to her medical history and some continued complications she has been on Medicaid health care coverage since birth. We were advised this year to move the 529 money out of her name for Medicaid purposes since she cannot have assets in her name and continue to be eligible for Medicaid coverage. So, we rolled that money into a 529 account in my wifes name with the plan of switching it back to our daughter once she is off of Medicaid coverage.
Are there any tax implications for this move? If we are making or will make contributions towards this account this year or next will that change anything tax wise?

7) My wifes grandfather purchased some bonds in my wifes name years ago. Several of them came to maturity this year so we cashed them out. My understanding is that we would need to pay long term capital gains on the interest accrual of those bonds at the time of us cashing them out. Is that correct? Or would this be considered a gift and not taxed?
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