short term capital gains income tax question

me | 2020-12-7 | me

[SteveH]

in a rollover ira, i purchase some spy in june 2020 and occasionally a bit more, a bit later. i have had rollover ira for a long time, not done anything with it other than watch it gradually grow over time, until now. i am retirement age (over 60yo).

it used to be the fidelity version of spy for many years.

i want to sell $210k of spy now (dec 2020).

spy went up 17.67% in about 5 months.

i have a long term cg rate of 15%, short term cg rate of 37%.

will i only get zinged at 37% for the 17.67%?

(in retrospect, changing from one version of spy to another will, if i sell now, cost me at least an additional 22% on the gains for the time, yikes, but i wanted the flexibility to bail out during normal trading hours)

[calljack]

And they are going to get them too. Restrict tax deferred benefits in an IRA or a 401K to government backed securities, it t-bills, and viola, trillions of dollars of IRA and 401K money will move to government backed securities, which means it just went into the general fund. Its going to happen. Its the last big pot of money.

[SteveH]

the 2020 federal income tax bracket table

https://governmenty.com/tax-brackets#section3

[Starboard]

If he gets in even after all the fraud, then tax rates will go up

**************

Tax rate changes in the past have led to heavy December selling. Businesses will also be impacted by the higher rates so valuations might drop.

I’ve sold off some of my more aggressive tech holdings with LT gains.

[Starboard]

If you’re under Medicare taking a big chunk of money out can push you into a much higher Income Related Monthly Adjustment Amount (IRMAA) bracket. The monthly premium can get to be burdensome with a sharp boost in your AGI.

[damper99]

I didn’t say that I did. I kept my rollover separate. I was pointing out that some may have a basis in a traditional IRA, and would not see “every” dollar taxed. That’s one of the reasons for form 8606...to keep track on non-deductible contributions for your basis.

[kjam22]

I’m curious.... why would a person make a non-deductible contribution to an IRA?

[damper99]

I’m curious.... why would a person make a non-deductible contribution to an IRA?

Before Roth IRAs were devised, one had a choice of still making a IRA contribution even if they exceeded the income level for a deduction. IOW, you had the choice of making a non-deductible contribution or none at all. In that time, if an IRA was the only vehicle available to you, putting non-deductible money into it was better than nothing due to the tax deferral on growth. Looking at the form 8606, that is the reason for tracking a basis in a traditional IRA and carrying it forward until withdrawal. You don't pay taxes on the basis dollars (proportion) since there was no deduction granted for them earlier.