By now many of you have heard about the GameStop/Robinhood stock market news floating around social media sites like Reddit and TV lately. If not, instead of going on and on about short positions and mark-to-market. Here's a quick video that explains it all:
If that video is as clear as mud, or has you thinking you need to go trim your hedges outside, then let's add another wrinkle. What happens when the taxman comes knocking after you have sold your GameStop stock for a gain?
Stocks sold for a gain (buy low, sell high) are called capital gains income and is taxable. Stocks held for less than a year have short-term capital gains and stocks held for a year or long have long-term capital gains. Short-term capital gains are taxed at the ordinary rate which is typically higher than the long term rate. Short-term gains will be included with your other ordinary income (W-2, 1099, etc) and you will pay tax based on your marginal tax rate and income.
The key to lowering your tax with stock sales is to create a strategy that will enable you to pay lower taxes on capital gains. Some strategies include:
It it also important to note that with the change in the Presidential Administration, your stock tax plans will need to be devised in concert with your other personal and business tax situation(s).
Feel free to contact us if you need assistance with your stock tax strategies, small business tax, or tax planning. If you need new hedges, I may know a good landscaper.
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