What to do with unrealized capital gains?

Lyft
neuralnets

Go to company page Lyft

neuralnets
Feb 4, 2021 14 Comments

I unfortunately have hundreds of thousands of dollars in capital gains in things like crypto and Lyft.

What do I do?

How do I avoid giving the tax man a big scoop of my hard earned dough?

Should I sell and rebalance?

Should I quit my job and chill in a year or two so my income is low and I can cash it out without paying taxes?

Should I move to Texas to avoid the state tax?

I have many questions. Please advise. Thank you.

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TOP 14 Comments
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  • Amazon
    2CLdnV

    Go to company page Amazon

    2CLdnV
    If you don't expect prices for a given investment to stay at current levels, then just rebalance and pay the tax rather than ending up with a net loss if they lose value.

    If you've held stocks for at least a year the capital gains tax is low.

    If you're planning to donate money anyway, donating assets "in kind" without selling on your end is a great way to maximize your impact and deduct the gains.

    If they fit into your long term investment plan then you can just hold them until you "retire", take a sabbatical, or have a low income year.

    But if you're very over concentrated in an investment that's grown a lot and don't have a natural point in the next couple years when you plan to have lower income anyway, don't reduce your after-tax net income just to avoid paying tax. Just pay the tax and rebalance.
    Feb 4, 2021 0
  • Amazon
    seaaadd

    Go to company page Amazon

    seaaadd
    Make donation to donor advised charitable fund (Fidelity) or set up private charitable trust you can control. No capital gains taxes and it will substantially offset your high ordinary income tax bill that year.
    Feb 5, 2021 2
    • Google
      pDlG34

      Go to company page Google

      pDlG34
      I know rich people do the charity trust thing to hide their money. But they have whole staffs of people to help them with it.

      How feasible is this idea for normal code wagies like us?
      Feb 5, 2021
    • Amazon
      seaaadd

      Go to company page Amazon

      seaaadd
      @pDIg34: look at Fidelity Charitable Trust. It allows for the tax reduction in current year, while giving you option to later decide where to allocate funds. This gives nearly all the tax benefit you could want; and super simple.

      The next level up, charitable foundation/ trust fund that you control. With this, you can pay yourself to manage the foundation if you want to shift to nonprofit focused work (or other family members). But this is a massive jump up in dedicated funds. Beyond most of us now: but could be a target end game once all of those RSU have been vesting for 15 years. Just transfer the whole lot over to a foundation you set up. But it has MUCH higher costs and accounting. This is a lifestyle decision at that point (whereas Fidelity Charitable Trust) is simply a tax decision).
      Feb 5, 2021
  • Uber
    paperHand

    Go to company page Uber

    paperHand
    Check separately manager accounts in fidelity for tax loss harvesting
    Feb 4, 2021 0
  • Ossia
    YyJY54

    Ossia

    YyJY54
    Two things are certain in life, death and taxes.
    Feb 4, 2021 0