Options Wheel Trading Strategy Update - 12/30/24 (Tax Loss Harvesting)

[@steelhorses2004]

Not a tax pro but from Investopedia - "For example, if an investor sells the SPDR S&P 500 ETF (SPY) at a loss, they may immediately turn around and purchase the Vanguard S&P 500 ETF (VOO). The rationale is that the two S&P 500 ETFs have different fund managers and different expense ratios, may replicate the underlying index using a different methodology, and may have different levels of liquidity in the market. Presently, the IRS does not deem this type of transaction as involving substantially identical securities, and so it is allowed, although this may be subject to change in the future as the practice becomes more widespread." So I think you'd be safe buying MSTY as it's different management, different investing goals and strategies. MSTX maybe ok because of same criteria but idk for sure.

[@gitarzzan1]

Yea. That blows my mind that the irs doesn’t consider spy and Voo to be substantially similar.

[@wolfe5047]

you can trade options on any stock except MARA, MSTU, and SOXL or stocks that have a similar crypto exposure. You could look at trading some stocks with lower volatility. And try to just get 50% or so per contract instead of shooting for the sky every time. There are a lot of other stocks out there you won't make money as fast but you can get 40 to 50% in some of them.

[@josephsaeteurn9158]

many will have to learn it themselves.. that's how it works.. words wont do it.

[@KevinDaly-v8o]

Does the loss you just took outweigh the taxes you offset? Deduct at write off are pretty far apart. What I am wondering is whether it’s worthwhile to stay out of the next tax bracket but not really if you are just giving up potential income. I know you were pretty deep in the wrong direction on some of that but I didn’t think is all horrible. Just my thoughts.

[@likelinkspre]

Do you adjust your cost basis with each premium (selling calls) you get or only when your assigned another put?

[@RetireonDividends]

No I don’t adjust the cost basis with any premium received That premium received is income already made and I don’t want that same income gone justifying a lower cost basis if that makes sense

[@mandjstins50]

Yes, you are correct. I've used tax harvesting for 20 years. Really helped in 2010-2020. Lots of gains in the market but a few losers, which I sold in December to off set taxes

[@RetireonDividends]

thank you for confirming

[@thehoopscoop]

Tax loss harvesting works the same as ROC for accounting purposes. Defiance and Roundhill harvest losses that help offset gains through the year and that reclassifies premiums collected as RoC rather than profits when they distribute it. Capital losses can only offset capital gains though, as earned income from your W-2 or business is capped at writing of $2,000 annually.

[@steelhorses2004]

I guess I don't get the logic of taking a 70% capital loss to net 30% reduction in taxes. Your future options trading will have to make 100% roi to recover from the 70% capital loss (70% plus 30% in new taxes). Maybe I just don't get it.

[@RetireonDividends]

simply a tax play, the losses were there and will prob get worse so i feel like im resolving two different issues. Plus I was over exposed and I corrected that from getting worse. Basically a redo at an expense with a future benefit

[@steelhorses2004]

@@RetireonDividends Thanks! I'm gonna think about this tonight and see if it makes sense to me. My MSTX bag could take months to recover (if ever) and I could be making money with the funds freed up instead of waiting. MSTX is the only thing I'm holding that's underwater but have quite a few puts underwater too.

[@RetireonDividends]

Yea it’s worth a thought for sure Not saying it’s right or wrong

[@Returnofthejedi2000]

Ouch…but not as bad as some other KZbinr 😂😂😂you are correct on your tax loss harvesting you need to record 30 days before you repurchase the stock or etf to qualify for the deduction…and you can repurchase the stock on the 31st day …

[@RetireonDividends]

Do brokers hold off on sending their forms until Feb for that reason?

[@Returnofthejedi2000]

@@RetireonDividendsyes they do …plus a host of other reasons to many to list …the cutoff date to qualify is December 31st …remember you must wait 31 days to repurchase the same stock to qualify…

[@bobbyd6680]

I'd only be concerned about intentional tax loss harvesting if it prevents me from entering the next highest tax bracket. If my losses were unintentional and resulted from market fluctuations, then I would certainly take advantage of the deduction.

[@Wildnfree1001]

You can also out your money in something that performs well that will go up in price and then sell them after the 1st to offset your tax bill and then redo for the next year without lettingvho of valuable shares that pay you monthly on top of yhe 3000 you can deduct

[@Jeremy0341]

I pay 20% of my capital gains/dividend income in quarterly taxes to the IRS. It seems to work out well. No state taxes in the Great State of Texas.

[@austinmusiker145]

If you were assigned the stock within 31 days prior to sale at a loss date, it's a wash as well. I've been bitten by that more than once because I forgot to check when I last bought the stock.

[@RetireonDividends]

Ugh

[@tennischesslover]

But aren't we allowed to only deduct a MAX of $3000 as capital losses per year? This means all the excessive capital losses (beyond $3000 losses) would have to be deducted from the subsequent tax years. This is my understanding

[@RetireonDividends]

Yes if losses exceeded gains

[@HopeSouth12]

Yes, &3k per year, but you can continue deducting that $3k per year for the rest of your life. It never expires until you are down to zero.

[@macharlem]

Thanks 🙏

[@superiorservices-d8c]

My main trading account is in an LLC taxed as a Subchapter S Talk with a tax professional to discuss the possibility of tax savings for your personal situation. The LLC provides for deductions not available under the standard taxable account.

[@josephsaeteurn9158]

who is your broker? i have been looking for a broker to accept LLC as business account..

[@superiorservices-d8c]

@@josephsaeteurn9158 fidelity

[@macharlem]

@@josephsaeteurn9158hopefully you/we get an answer

[@HopeSouth12]

Be careful what state you are in creating a LLC to trade in. Since Tennessee doesn’t have a state income tax, they added a yearly Franchise Excise tax to all assets in a LLC. We had a commercial building in a LLC to protect our other assets. I hate paying that fee every year, while other commercial building owners just put large riders on their insurance policies to protect them further.

[@superiorservices-d8c]

@HopeSouth12 not legal advice. I personally would create the LLC in a different state, register as a foreign entity, and avoid that tax.

[@rickmeade6057]

i get into wash sales al the time and will be getting into more soon

[@tylerpashel1789]

Why did msty just tank?

[@josephsaeteurn9158]

its gonna keep tanking.. your boy at MSTR is and will keep diluting shares to buy bitcoins.

[@Returnofthejedi2000]

Many people that just stared investing in bitcoin or mstr don’t understand it can drop 40% at any point at any time for any reason this week believe it or not it’s at least a dozen reasons why bitcoin is down …that’s not even the worst the other day someone on a famous podcast said and I quote…” that person is diversified and we’re are not we have Msty and Tsly so we will catch up to them “…3 days later they will be getting a margin call …brilliant 😂😂😂

[@TBasianeyes]

good move considering that you were only holding the bags anyways

[@Wildnfree1001]

Look into qualified dividrnds abd original dividends. You need a tax person ehi knows what they are doing but qualified dividends you dhoukd be able to keep tax free under certain conditions the iriginal you have to pay before you make all if the changes

[@TheDale53]

Let’s say you have a realised gain of $10,000, and what you just did was to sell positions that have a total realised loss of $10,000. So now you owe no money to the IRS, but for 1 month you can’t trade those positions. It’s important to understand that of the realised gain of $10,000 that you had, you only would have owed $2,500 if you are in the 25% tax bracket. Often times it’s better just to pay the tax and not have to worry about the Wash Sale Rule.

[@johnhornsby6759]

There is a 3K limit on losses

[@TheDale53]

If you have $100,000 in gains and $20,000 in losses, then you will pay taxes on $80,000. If you have zero gains and $50,000 in losses, then you will only be able to deduct $3,000 this year for that loss of $50,000. But next year you will be able to carry over the $47,000 loss and deduct another $3,000. And that can continue from year to year.

[@hilarynguyen2784]

I learned my lesson with MSTX too😢.

[@rickmeade6057]

some are sixty days

[@howtoinvest4yourself241]

I am not looking forward to this coming taxes.. I have too many gains the 3K would not be enough to offset my bill

[@josephsaeteurn9158]

you should be happy to pay more tax.. means you make more money.. would you prefer to pay less tax and make way less money?

[@josezayas6847]

I don't understand none of that but all I know is I make less than $20,000 a year. And I figure I don't have to pay the IRS anything.

[@JulioMoscoso39]

Lmao the clappening 😅

[@memoryalpha921]

Why increase your withholding on your pay check? Your giving more free loan money to the state and feds. You should just opt to put in estimated taxes instead. Keep you check for investments, bills, etc. use estimated taxes to cover your gains and option premiums. That way you only are giving the government taxes only 4 times a year instead of 12.

[@Wildnfree1001]

KZbin is a business and should be tax deductible. Get a good tax attorney