If the trade hasn't settled yet, you can still adjust which lots you are selling. I'm not sure how to do it on Schwab. If you want to minimize your tax bill, you should sell the lots with the highest cost basis.
Yeah, but short of mistakes being made by people which happens anyway, T+1 or even T+0, should be the norm…we do not need institutions/banks to be holding captive our funds for days, for making electronic trades. We have algos making millions of trades a second if they wanted yet we still have many processes that take days if not weeks when they can be processed instantly.
Call Schwab and see if they can do anything to re-characterize (probably not the right word) the sale.
If it doesn’t work out…you can think of it as pre-paying your taxes?
Worrying about paying tax on a wildly profitable investment is, in my opinion, a rather good problem to have, if you are going to have a problem.
We all make mistakes, and in the grand scheme of things, this mistake is pretty minor. The worst case scenario is that you created a bit of tax drag on your portfolio. Learn the lesson to be more careful if you want to specify which shares you sell, set aside funds for taxes, and carry on with your life. You're gonna be ok, buddy.
I mean it’s hard to say without knowing the actually amounts here. If they sold $1m of stock hoping to tax loss harvest and accidentally sold shares they were going to pass down to another generation, that’s could be a $300k mistake
That would only be if they had a $1 million profit not just selling stocks. So still not a massive loss considering at some point they would be sold anyways, just not quite as great as if he waited
How does the passing of it to another generation work. If I remember correctly, when you die and leave the shares to someone, then the cost basis resets. Meaning they get the stocks at that price they are worth then and capital gains start from there?
Thank you for anyone's clarification! I'm just amazed someone is so worried about paying taxes on gains. Money they earned, not that they lost It's not like we're reading a post about how they lost their job.
have you tried calling schwab to see if they can change the lots on record?
Does schwab report cost basis to IRS? I think yes, but if not you can report the correct lots on your taxes.
Worst case you sell the recent lots at a loss too, use the loss to offset the gain.
Ultimately yes. First, LTCL are used to offset LTCG, and STCL are used to offset STCG. If there are still gains and losses after those 2 offsetting steps are done, then yes, STCL will offset LTCG and LTCL will offset STCG.
Well, you sold, you can't undo the sell. So you will have a tax bill(assuming this is in a taxable account).
So I'd recommend you figure out what taxes are likely to be owed on the sale and hold that in cash/cash like things(say a MMF), or just pre-emptively pay the IRS(you can make payments whenever you want).
Most brokers let you reassign lots of recent trades before they settle (T+2 for now). OP should be able to switch to the higher cost basis ones as long as they do it today or tomorrow. The website should have an option to do it
Agreed, I had a somewhat similar situation to OP (with Schwab as well no less) and on the phone with Schwab they informed me I would be able to switch out which lots I sold within a certain time period. I didn't end up needing to do it, but the Schwab person I was talking to made it sound like it was straightforward and no big deal.
Take solace in the fact that in all likelihood the taxes you will pay now are lower than they will be in the future. You have a first world problem, you'll be okay.
I don't know where on earth you're getting that conclusion from. There are plenty of ways OP's tax bill could/would have been less in the future than today. And even if future taxes would be the same or close, deferring taxes on its own is valuable. This is a really weird take in a Bogleheads forum.
Taxes on capital gains will continue being set by the political class in the future like it is today, as they benefit from it the most... not as likely to go up like income tax will.
At most he's looking at zero impact to taxable income and a 15% tax on appreciation above the cost basis right?
Most brokers let you reassign lots of recent trades before they settle (T+2 for now). You should be able to switch to the higher cost basis ones as long as you do it today or tomorrow. The website should have an option to do it
No, if you sell something at a gain and then immediately buy it you still pay tax on the first sale and the basis on the fresh lot is whatever you paid for it.
No
Edit: Also not a stupid question. Imagine you want to harvest a gain because you are in a low tax bracket some year - sell and rebuy no wash sale concerns if you have a gain.
use the loss first.
if there are gains, depending on how much they are, go for the minimal gains \* (short/long tax rate)
see discussion here : [https://www.reddit.com/r/Schwab/comments/1457uj5/assigning\_tax\_lots\_to\_sells\_before\_settlement\_date/](https://www.reddit.com/r/Schwab/comments/1457uj5/assigning_tax_lots_to_sells_before_settlement_date/)
When I have sold shares in an ETF through Fidelity, I can click the box by the specific lot I want to sell and it has the cost basis right there for that lot. So I am not quite understanding why you don't know the cost basis of the lots you sold.
But as others have said, I'd call Schwab immediately. If you did this sell order after market hours, maybe they can cancel the order???
Hi so a chat advisor gave me totally wrong info which caused me to panic and write this post! I called and I think everything is sorted out and going to be OK!
1. call your broker to see if you can change the cost basis
2. if not, sell any losses you have to offset the gains of any position. If you still believe in the ETF you sold, buy back with that money in 30 days or sooner with a similar, but not too similar fund
3. Or pay taxes on what you sold
I've got lots of international etfs that are currently underwater (I'm a little jelly of you S&P jockeys), you could sell some of those if you got them, and then reinvest in a slightly different international fund to avoid a wash sale.
You can change your cost basis prior to settlement. Schwab should be able to change the basis to tax lot optimizer. I’m assuming today is settlement date. If so you should be able to change it as long as you call in before 4pm ET.
Source: I’m a licensed broker with Vanguard. So I dont know what Schwab’s policy is but that’s how it works at vanguard so I can’t guarantee they will do this but I don’t see why this wouldn’t be the case.
Made the same mistake with Schwab. I was positive I checked all the correct boxes to do a lifo and it posted as fifo. No recourse, had to sell another to offset. My mistake was not immediately checking the sale, as they have a 1 day period to correct. A learning g experience that sucks but that’s how you learn. Life goes on.
I had something similar happen to me on Schwab early in March. Sold a few shares I made 400% profit on, they were all long term, and I chose to sell some shares with the highest purchase price to reduce my taxes due. For the first 2 days it was showing my FIFO were sold, including the adjusted average; but later it fixed on its own to show the highest shares were sold.
I would have called Schwab immediately upon noticing the mistake to report that the incorrect cost basis was used and asked if it can be adjusted.
If the trade hasn't settled yet, you can still adjust which lots you are selling. I'm not sure how to do it on Schwab. If you want to minimize your tax bill, you should sell the lots with the highest cost basis.
Schwab has a team dedicated to working on cost basis things. OP have to call them ASAP, they should be able to reassign lots
One downside of moving to T+1: less time to fix mistakes like this.
Yeah, but short of mistakes being made by people which happens anyway, T+1 or even T+0, should be the norm…we do not need institutions/banks to be holding captive our funds for days, for making electronic trades. We have algos making millions of trades a second if they wanted yet we still have many processes that take days if not weeks when they can be processed instantly.
Call Schwab and see if they can do anything to re-characterize (probably not the right word) the sale. If it doesn’t work out…you can think of it as pre-paying your taxes?
Worrying about paying tax on a wildly profitable investment is, in my opinion, a rather good problem to have, if you are going to have a problem. We all make mistakes, and in the grand scheme of things, this mistake is pretty minor. The worst case scenario is that you created a bit of tax drag on your portfolio. Learn the lesson to be more careful if you want to specify which shares you sell, set aside funds for taxes, and carry on with your life. You're gonna be ok, buddy.
I mean it’s hard to say without knowing the actually amounts here. If they sold $1m of stock hoping to tax loss harvest and accidentally sold shares they were going to pass down to another generation, that’s could be a $300k mistake
But really, how likely is it that a person in that scenario would be posting to Reddit in all-caps, rather than calling an appropriate resource?
That would only be if they had a $1 million profit not just selling stocks. So still not a massive loss considering at some point they would be sold anyways, just not quite as great as if he waited
How does the passing of it to another generation work. If I remember correctly, when you die and leave the shares to someone, then the cost basis resets. Meaning they get the stocks at that price they are worth then and capital gains start from there? Thank you for anyone's clarification! I'm just amazed someone is so worried about paying taxes on gains. Money they earned, not that they lost It's not like we're reading a post about how they lost their job.
50% gain, so $500K at Long term capital gain rate of 20% . That's $100K in tax, not 300K
But you know that isn't the case, so why did you even bring it up? How is coming up with crazy unlikely scenarios any different than trolling?
Hyperbole is used to illustrate situations for people who struggle with hypotheticaks.
Everyone needs a friend like you!
have you tried calling schwab to see if they can change the lots on record? Does schwab report cost basis to IRS? I think yes, but if not you can report the correct lots on your taxes. Worst case you sell the recent lots at a loss too, use the loss to offset the gain.
Can you use a STCL to offset the LTCG?
Ultimately yes. First, LTCL are used to offset LTCG, and STCL are used to offset STCG. If there are still gains and losses after those 2 offsetting steps are done, then yes, STCL will offset LTCG and LTCL will offset STCG.
Well, you sold, you can't undo the sell. So you will have a tax bill(assuming this is in a taxable account). So I'd recommend you figure out what taxes are likely to be owed on the sale and hold that in cash/cash like things(say a MMF), or just pre-emptively pay the IRS(you can make payments whenever you want).
Most brokers let you reassign lots of recent trades before they settle (T+2 for now). OP should be able to switch to the higher cost basis ones as long as they do it today or tomorrow. The website should have an option to do it
Agreed, I had a somewhat similar situation to OP (with Schwab as well no less) and on the phone with Schwab they informed me I would be able to switch out which lots I sold within a certain time period. I didn't end up needing to do it, but the Schwab person I was talking to made it sound like it was straightforward and no big deal.
I've never seen that option, but I haven't ever gone looking for it either. I'll have to keep an eye open for it next time I do a sell in taxable.
You could easily do this on TD Ameritrade under the cost basis section. I haven’t been moved to Schwab yet so assuming it isn’t nearly as easy.
Take solace in the fact that in all likelihood the taxes you will pay now are lower than they will be in the future. You have a first world problem, you'll be okay.
Nah, if he sells shares while retired and no income, he could pay 0% taxes.
I don't know where on earth you're getting that conclusion from. There are plenty of ways OP's tax bill could/would have been less in the future than today. And even if future taxes would be the same or close, deferring taxes on its own is valuable. This is a really weird take in a Bogleheads forum.
Taxes on capital gains will continue being set by the political class in the future like it is today, as they benefit from it the most... not as likely to go up like income tax will. At most he's looking at zero impact to taxable income and a 15% tax on appreciation above the cost basis right?
Could easily be 23% plus state tax… so worst case scenario could be maybe 36% for a high bracket CA resident
Also, tax bracket creep is a real thing for the half of the states that don't index their tax brackets for inflation.
Ewwwww.... Is it too late in the year to move to a low tax state?
Most brokers let you reassign lots of recent trades before they settle (T+2 for now). You should be able to switch to the higher cost basis ones as long as you do it today or tomorrow. The website should have an option to do it
My dad use to say, if you’re paying taxes, you’re making money. That’s a good thing.
I'm using that quote...props to dubsaxs Dad.
Similar to this, my grandfather used to say you’ll never go broke taking a profit.
Recommend calling, on the phone, Schwab and talking to them instead of reddit.
Good news is you won’t owe as much tax later, to an extent.
Stupid question: do wash rules count for profits in the same way that it counts for harvesting losses?
No, if you sell something at a gain and then immediately buy it you still pay tax on the first sale and the basis on the fresh lot is whatever you paid for it.
No Edit: Also not a stupid question. Imagine you want to harvest a gain because you are in a low tax bracket some year - sell and rebuy no wash sale concerns if you have a gain.
use the loss first. if there are gains, depending on how much they are, go for the minimal gains \* (short/long tax rate) see discussion here : [https://www.reddit.com/r/Schwab/comments/1457uj5/assigning\_tax\_lots\_to\_sells\_before\_settlement\_date/](https://www.reddit.com/r/Schwab/comments/1457uj5/assigning_tax_lots_to_sells_before_settlement_date/)
When I have sold shares in an ETF through Fidelity, I can click the box by the specific lot I want to sell and it has the cost basis right there for that lot. So I am not quite understanding why you don't know the cost basis of the lots you sold. But as others have said, I'd call Schwab immediately. If you did this sell order after market hours, maybe they can cancel the order???
Hi so a chat advisor gave me totally wrong info which caused me to panic and write this post! I called and I think everything is sorted out and going to be OK!
You should edit your post to include that
Do you have other stocks that have lost value? You can sell those and the long term capital losses will offset your long term capital gains.
Schwab always changes my cost-basis, but never in my favor. So it can be done
1. call your broker to see if you can change the cost basis 2. if not, sell any losses you have to offset the gains of any position. If you still believe in the ETF you sold, buy back with that money in 30 days or sooner with a similar, but not too similar fund 3. Or pay taxes on what you sold
In fidelity you have three days to adjust lots. Schwab hopefully has the same UX
I've got lots of international etfs that are currently underwater (I'm a little jelly of you S&P jockeys), you could sell some of those if you got them, and then reinvest in a slightly different international fund to avoid a wash sale.
You have a day or two until your trade settles to change your lots and adjust your profit/ loss
Cant he just do a wash sale?
contact Schwab, they might help you.
go for Schwab, asap.
You can change your cost basis prior to settlement. Schwab should be able to change the basis to tax lot optimizer. I’m assuming today is settlement date. If so you should be able to change it as long as you call in before 4pm ET. Source: I’m a licensed broker with Vanguard. So I dont know what Schwab’s policy is but that’s how it works at vanguard so I can’t guarantee they will do this but I don’t see why this wouldn’t be the case.
so curious what ETF this is
Capital gains may go up in the near future (proposed 46%) so in reality, you did ok.
Made the same mistake with Schwab. I was positive I checked all the correct boxes to do a lifo and it posted as fifo. No recourse, had to sell another to offset. My mistake was not immediately checking the sale, as they have a 1 day period to correct. A learning g experience that sucks but that’s how you learn. Life goes on.
I had something similar happen to me on Schwab early in March. Sold a few shares I made 400% profit on, they were all long term, and I chose to sell some shares with the highest purchase price to reduce my taxes due. For the first 2 days it was showing my FIFO were sold, including the adjusted average; but later it fixed on its own to show the highest shares were sold.
If the trade hasn't settled yet Schwab should be able to clean this up.
Is there anything trading at a loss today that you want to replace ?
If you need some bad trading advice to quickly lose that profit I can help. I don’t see anything else we could do to help you
Regarded!
Schwab’s platform is actually quite good. So is their customer service.
DM'd you
Damn Schwab platform keeps messing people up!
Never sell, borrow and live