Can I choose which stock lots to sell?

When you decide to sell a portion of your holdings in a stock, you have to decide which shares you actually want to sell. Two of the most common methods used in this decision are known as FIFO and LIFO, and the choice you make can have a big impact on your taxes.

Is it better to sell stock FIFO or LIFO?

FIFO stock trades results in the lower tax burden if you bought the older shares at a higher price than the newer shares. The LIFO method typically results in the lowest tax burden when stock prices have increased, because your newer shares had a higher cost and therefore, your taxable gains are less.

What is the best tax lot ID method?

Most people choose the FIFO method because it is the default in most software packages, and it’s convenient for tracking cost basis. But take a look at how the specific-shares method can help you minimize your gains compared to those standard FIFO or LIFO methods. This is what is meant by selecting specific tax lots.

How can I reduce tax when selling stock?

That said, there are many ways to minimize or avoid the capital gains taxes on stocks.

1. Work your tax bracket.
2. Use tax-loss harvesting.
3. Donate stocks to charity.
4. Buy and hold qualified small business stocks.
5. Reinvest in an Opportunity Fund.
6. Hold onto it until you die.
7. Use tax-advantaged retirement accounts.

Which stock lot should I sell first?

Shares with the greatest cost basis are sold first. If more than one lot has the same price, the lot with the earliest acquisition date is sold first. Shares with a long-term holding period are sold first, beginning with those with the greatest cost basis.

Can you sell specific tax lots?

Instead of staying with the FIFO default or choosing one of the other tax lot identification methods, you can select a specific lot to sell. You may select your specific lot from the day following your trade execution or, at the latest, before 11:59 p.m. ET on the settlement date of the trade.

Can I use LIFO for stock sales?

Yes, you can choose which stocks you sell by giving the proper instructions to your stock broker. The IRS does not prohibit you from choosing the LIFO (last in, first out) method rather than the FIFO method.

Which stock should I sell first?

How do I choose my tax lot?

The highest cost method selects the tax lot with the highest basis to be sold first. Put another way, the shares you paid the most for, are sold first. One thing to keep in mind, the highest cost method doesn’t consider the length of time you own shares.

How can I reduce capital gains tax?

Five Ways to Minimize or Avoid Capital Gains Tax

1. Invest for the long term.
2. Take advantage of tax-deferred retirement plans.
3. Use capital losses to offset gains.
4. Watch your holding periods.
5. Pick your cost basis.

Can I sell stock and reinvest without paying capital gains?

If you hold your mutual funds or stock in a retirement account, you are not taxed on any capital gains so you can reinvest those gains tax-free in the same account.

What is tax Lot Optimizer?

Tax Lot Optimizer™ Lots are selected and sold with the objective of taking losses (short-term then long-term) and gains last (long-term then short term). Click here to see the order of sales for this method. Short-term losses. Lots reflecting short-term losses, from greatest short-term loss to least short-term loss.

Which tax lot-matching method should I use?

Run real-time “what-if” scenarios to see how different lot-matching methods affect your gains and losses. Choose from among several tax lot-matching methods, including LIFO, FIFO, Maximize Long-Term Gain, Maximize Long-Term Loss, Maximize Short-Term Gain, Maximize Short-Term Loss and Highest Cost.

Should you use the FIFO or specific shares method?

For individual stocks and bonds, you can use: Most people choose the FIFO method because it is the default in most software packages, and it’s convenient for tracking cost basis. But take a look at how the specific-shares method can help you minimize your gains compared to those standard FIFO or LIFO methods.

What can I do with the Tax Optimizer?

The Tax Optimizer lets you: Change the default matching method for your account or for the current or prior trading day. Run real-time “what-if” scenarios to see how different lot-matching methods affect your gains and losses.

What is the difference between FIFO and LIFO stock trades?

FIFO vs LIFO Stock Trades. Under FIFO, if you sell shares of a company that you’ve bought on multiple occasions, you always sell your oldest shares first. FIFO stock trades results in the lower tax burden if you bought the older shares at a higher price than the newer shares. For example, if you bough a bunch of stock before a recession,…