The new tax lot accounting rules for 2011 has changed the way we track taxes on stock sales. No longer will you be able to number crunch your way to lower taxes on your stock sales at year’s end. Instead you’ll need to calculate cost basis throughout the year. When you track your profits/losses, you can use the tax lot accounting method that gives you the best tax savings at the time of sale.
Tax Lot ID Refresher Course
Which accounting method you choose will depend on your capital gains tax (which we covered in part 1) and how many tax lots you have of a particular stock. Every time you buy a stock, whether it’s one share or 1,000 shares, that stock purchase is given a tax lot ID. You can have multiple tax lots in the same stock. Continue Reading…