With the new tax lot accounting rules taking effect this year, getting more in depth with the tax lot accounting methods was necessary. In the past you could crunch the numbers at years end, to figure out the lowest possible taxes on your stock sales. As of January 1st, you’ll need to know how to calculate tax basis for each investment at the time of sale.
Throughout the year, keeping track of each stock sale (profit and loss) will be a requirement, in order to minimize your taxes at the end of the year. Online brokers are now required to keep track of your realized gains and losses throughout the year. You can use a simple spreadsheet to do the trick as well.
By tracking each stock sale throughout the year, you’ll be able to use the best tax lot accounting method to keep your taxes as low as possible. Remember though, that the type of tax you pay will depend on how long you have owned that stock. Continue Reading…