Tax discussion, strategies and questions

[bkp_duke]

You will probably be able to buy more shares AFTER P&D comes out, and the SP tanks 10% because TSLA had 47% growth instead of 50%....

I'm giving this the Funny tag, but I want to cry too b/c I know it's true . . .

 

[mongo]

@wipster, not sure you saw the previous post from someone else, but the wash rule prevents this sadly.

...

Again, not financial advice, only stayed at a Holiday Express, yada yada yada...

@wipster is not selling at a loss. He is selling at less of a gain and paying capital gains tax on the proceeds. Wash rule does not apply.

 

[wipster]

@wipster is not selling at a loss. He is selling at less of a gain and paying capital gains tax on the proceeds. Wash rule does not apply.

You are correct, I am not selling any shares at a loss. The purpose of offsetting the medical expenses is to eliminate some of the ~500% capital gain from early TSLA purchases. The way I read it the wash rule only applies to losses.
Thanks @mongo! And you too for bringing it to my attention @bkp_duke!

 

[Dayreg]

I'm in the process of my first backdoor Roth conversion. If I contribute now, when is the next time I can do an additonal conversion? (I'm spacing them out to stay in a lower tax bracket.)

Would it be based on calendar year, ie. January 1, 2023?
Or would be twelve months from the date of the last conversion, in this case, Dec 9, 2023?

Thanks in advance!

 

[kcveins]

I'm in the process of my first backdoor Roth conversion. If I contribute now, when is the next time I can do an additonal conversion? (I'm spacing them out to stay in a lower tax bracket.)

Would it be based on calendar year, ie. January 1, 2023?
Or would be twelve months from the date of the last conversion, in this case, Dec 9, 2023?

Thanks in advance!

Everything is based on the calendar year from a tax perspective
So, yes, you can do your next conversion on January 1

 

[gabeincal]

@wipster, not sure you saw the previous post from someone else, but the wash rule prevents this sadly.

I think the workaround would be to sell your shares and buy calls a month out that you would use to buy back your shares at a fixed price at the beginning of February. Calls are disparate enough from stocks that the wash rule should not be in effect (the IRS rule is fuzzy, mentioning not "substantially identical" assets). From a practical preservative, almost certain your brokerage won't flag it as a wash rule though. I'd consult your accountant first obviously (unless there's someone here that can chime in).

Again, not financial advice, only stayed at a Holiday Express, yada yada yada...

Goes without saying that one should NEVER exchange their shares to long call options expiring a month out! VERY ballsy move. To 2-year out LEAPs, sure, one can go through a wash sale period with relatively low risk. Still magnified risk compared to shares. Best I see is to sell calls until called upon, sell shares, sell puts weekly for 30-day period and then make sure you assign the puts and buy back the shares. This would almost guaranteed to make money, with the exception of a stock running away from you within that period. It doesn’t look like it’s running anywhere - not advice.

 

[mongo]

Goes without saying that one should NEVER exchange their shares to long call options expiring a month out! VERY ballsy move. To 2-year out LEAPs, sure, one can go through a wash sale period with relatively low risk. Still magnified risk compared to shares. Best I see is to sell calls until called upon, sell shares, sell puts weekly for 30-day period and then make sure you assign the puts and buy back the shares. This would almost guaranteed to make money, with the exception of a stock running away from you within that period. It doesn’t look like it’s running anywhere - not advice.

It wasn't a convert $ from shares to calls, it was sell shares to reset basis and use up tax deduction, then buy calls to convert back to sameish number of shares after 30 days only loosing out on time value (assuming SP went up, otherwise just buy the shares). In this setup, call debit spreads would also work.

Wipster isn't deal with wash rule anyway so it's all moot for him.

 

[mongo]

That $3,750 discount for new cars should help. The bitch about the $7,500 tax credit is that you have to owe that much FIT in order to take advantage of it and I typically don't owe any taxes, so it's really not that good of a deal, plus it's income constrained as well.

For most folks I would think the discount makes more sense, if you're buying new that is. As I posted earlier, there's some screaming deals in used inventory.

Do you have any IRAs/ 401ks you can roll to a Roth to use the credit against?

 

[wipster]

Do you have any IRAs/ 401ks you can roll to a Roth to use the credit against?

No. Didn't even think about that. It would be a good strategy for folks that have them though. I'm not in the market currently due to physical limitations, but hopefully will be next year. The nice thing about Teslas is they just keep getting better (and maybe cheaper if they roll down reductions in COGS to prices). Would love to have an Austin built Y with dual castings and a structural battery pack with 4680's.

Time will tell...

 

[wipster]

Post in thread 'Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable' Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

 

[wipster]

You are correct, but each case is different. The only thing I owe FIT on is capital gains (mostly long-term) and a piddling amount of dividends. However, since I (hopefully) won't have a huge amount of medical expenses in 2023, if I sold enough chairs to buy a Y, I would have the taxes to take advantage of it!

Thanks for turning on my brain @mongo and @thesmokingman!

Post linked above...

 

[lascavarian]

Bit of a US tax question, if I understand, sales today may not settle until 2023. Is this meaningful or even correct?

 

[Buckminster]

Bit of a US tax question, if I understand, sales today may not settle until 2023. Is this meaningful or even correct?

Short term TSLA Calendar

 

[lascavarian]

Short term TSLA Calendar

Thanks. Interesting difference between simple long stock sales (Friday) vs closing covered calls for instance which seems to be today (for inclusion in 2022) as I read it.

 

[TrendTrader007]

Bit of a US tax question, if I understand, sales today may not settle until 2023. Is this meaningful or even correct?

i am not a CPA so not an advice. my understanding is that for USA the day you sell your common stock or liquidate a call option is the date recorded for tax purposes. settlement is T+2 for common stock and T+1 For options. however, it is the trade date and not the settlement date that matters. so one could sell TSLA common or calls tomorrow which is Friday, 12-30-22 and still record it as a trade in 2022 despite settlement not occurring until next year
please do check with your CPA and do not use this as any tax advice

T+2 means that if you sell TSLA on a Monday, trade settles on a wednesday, assuming no holidays in between
T+1 means if you close a long TSLA call options position on Monday, it settles next day, which is Tuesday

 

[betstarship]

Start of my taxes for this season! I spent last year trying to do nothing in order to test how livable a life is with passive income streams. Some thoughts:

- Dividend growth portfolios are highly variable and, usually, less than expected in terms of income
- If you care about prioritizing income for a portion of your portfolio, while ignoring growth, bonds (monthly dividends) are great
- Real estate can creep up on expenses on an annual basis and property tax season needs to be accounted for
- I've read that a pure test for standard withdrawal rate is limiting a withdrawal to only once at the beginning of the year to account for everything and, then, seeing how much and how often you have to dip into funds to justify expenses. Then, get better if its more than 1 withdrawal.
- Extraneous spending is easy to account for and limit/expand as needed (e.g. vacation and dining out), what's difficult is when life surprises you (e.g. family/personal health + ancillary expenses along with it). Best to have a buffer
- Estimated taxes are rough at times, but entirely necessary to get done
- I'd suggest getting a tax person, totally worth it for me

 

[Knightshade]

So if I'm reading you right, if I purchase an EV that is eligible for a $7,500 federal tax credit in 2024, I would still be able to have the full amount even if I didn't owe any federal tax in 2023, as long as I met income requirements?

Correct- IF the proposed rules go into effect as just published the only reason they'd claw anything back is the AGI limit and you get to use the better-for-you of 2 years on that.

But isn't this an interest free credit?
If you get a car at the beginning of Q1 you can pay back the 7500$ at the end of Q4?

I mean, same is true if you just set your withholdings a lot lower than you know you'll actually owe, this is just a bit more front-loaded.

Plus as I mention if you suddenly owe another $7500 extra when you reconcile you might have an underpayment penalty.... (that said- I always set myself up to owe a fair bit each year because the underpayment penalty is pretty small-- plus you can usually make a solid profit by paying the resulting big tax bill with a few new credit card signups that much more than offset both the CC fee and the underpayment cost)

 

[Usain]

I mean, same is true if you just set your withholdings a lot lower than you know you'll actually owe, this is just a bit more front-loaded.

If you do that, you will often owe an interest penalty on top of your taxes. But the $7500 at point of sale is a true interest-free loan.

 

[Knightshade]

If you do that, you will often owe an interest penalty on top of your taxes. But the $7500 at point of sale is a true interest-free loan.

I don't think that's true.

The penalty is based on what you paid throughout the year vs what you actually owe.

The $7500 POS, if you don't qualify, gets added to what you actually owe-- it'd be exactly the same for penalty calculation purposes as withholding $7500 less throughout the year other than you get it all at once.

 

[Usain]

I don't think that's true.

The penalty is based on what you paid throughout the year vs what you actually owe.

The $7500 POS, if you don't qualify, gets added to what you actually owe-- it'd be exactly the same for penalty calculation purposes as withholding $7500 less throughout the year other than you get it all at once.

I was talking about those who qualify, which will be the vast majority of buyers. If you do qualify then you are getting a $7500 interest-free loan.