rookie question: do you always not reinvest a percentage say 20-40% of the proceeds whenever you make a sell for profit?
In other words, should I say at minimum keep 20% of every profit I gain in cash to prepare for taxes at the end of the year? or Are people just buying and selling throughout the year without putting cash aside for taxes?
And if not in cash, how do you keep a cushion for tax? Do you still keep it in VOO or something else?
My main concern is, I hardly ever take profits. At the start of the year I took profits to rebalance my portfolio a bit. Now some of my picks have done really well. I'm thinking about taking some profit but i'm unsure what to do with the profit. If I just take the profit and reinvest in something else, I risk it going down and then still needing to pay taxes on the profit (suppose I don't tax loss harvest later in the year).
I rambled a bit, but hopefully you get my question. How to plan smartly for tax burden at the end of the year.
How do people manage funds for their taxes when they sell for profit?
byu/Remote_Ice_6446 instocks
Posted by Remote_Ice_6446
4 Comments
Just make sure you have enough losses to never have a profit and botta boom you don’t ever have to manage funds.
You either keep cash to cover your tax responsibilities or sell your losers to offset. Or both. If you dont, then you’re essentially leveraging your amount you owe for tax.
Not selling works quite well.
Set aside the cash you’ll owe for tax. Put it in HYSA or SGOV. I suppose you can put it in a broad index like VOO too but you then count on no crashing, and if it does go up when you sell to pay tax you incur more tax.