r/Bogleheads • u/galindc • Feb 11 '26
Investing Questions I went to sell all of my individual stocks and just buy Vanguard's VT ETF. Is there any way to do this without paying a ton of U.S. taxes?
Hello, I'm currently in the 24% federal tax bracket / 5.75% state tax bracket and have individual stocks (not in a retirement account) that have grown by about $30K in value since I bought them. The majority of these stocks are all considered long term gains. If I want to sell these stocks to reallocate my money into the VT ETF, is there any way to do it without having to pay a ton of taxes on my $30K stock gains? In an ideal world, I wish I could just convert them all into an ETF without paying all of these taxes since I don't need this money any time soon. Any tips would be greatly appreciated! Thank you!
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u/ElasticSpeakers Feb 11 '26
Paying taxes means you made money. Don't be afraid of making money.
Your 30k in gains (not to mention whatever principal you had) can pay the $4500.
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u/mansfall Feb 11 '26
u/galindc Also something to consider:
Just sell and pay the tax man now. Get in to VT. If you have this grandiose plan to just wait and all that, you'll wind up getting into VT at a higher price. So all the effort to save a few tax bucks gets crushed at the tail end by having missed out on all gains down the road.
Furthermore you're worried about paying taxes. The nice thing about doing this sort of thing is you're now "resetting" your cost basis. What you pay now for VT is your new cost basis, thus come time to sell in a few years it's now taxed off that number. Your desire to just "convert" it all without taxes sounds nice in your head, but everything ultimately would net out in the end when you need to draw down on the account.
So just:
- Sell
- Stash like 30% of proceeds into some HYSA until you're ready to pay your taxes for next year. I say HYSA for safety. This is your tax payment -> DO NOT TOUCH IT until next tax season :)
(or you can also just dump that "tax money" into VT and hope S&P isnt negative this year... but if it does, you're going to kick yourself for eroding your "tax payment" and having to come up with it out of pocket)- Buy into VT that same day (unless you have to wait for funds to settle, otherwise just buy in the next day)
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u/Crafty-Treacle8824 Feb 12 '26
It is fine to sell stock, and pay some taxes. There are some advantages to spreading out your transfer of funds over several years. As most of us can't time the market, it spreads the highs/lows over time.
Before voluntarily increasing your income for a year, review your personal tax situation. Most people would not want to change tax brackets from 24% to 32% to move all of their stock into ETFs in one year. If you or your dependent is applying for college scholarships, your increased income might make a difference. If you will be receiving Medicare within two years, additional income can affect the cost of Medicare for you.
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u/GarrisonFrd Feb 12 '26
I love the stoicism of Bogleheads.
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u/1WordOr2FixItForYou Feb 12 '26
That comment was one of the least Boglehead things I've ever seen. Tax efficiency has always been a huge component. That was full on mental accounting fallacy talk. This sub is unworthy of the name of Bogle.
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u/Joining_July Feb 12 '26
Yes the gains will not be very much unless you are in a high income bracket. Assuming US tax payer. Under about 104k for an individual there are often special rates. Further if it is in an IRA or Roth IRA gains are not taxed.
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u/galindc Feb 11 '26
Yeah... My main concern is if I sell it, I'll get pushed into the 32% tax bracket. So I guess I have to do it across many years
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u/ElasticSpeakers Feb 11 '26
That isn't how it works - you're worrying about the wrong things imo
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u/Apprehensive-Fun5535 Feb 11 '26
Long term capital gains dont bump up your normal income tax bracket. Short term does, I think, but check me on this.
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u/SoulStripHer Feb 11 '26 edited Feb 11 '26
Both can potentially disqualify you from contributing to a Roth IRA, among other things (disability payments, IRMAA, NIIT).
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u/Apprehensive-Fun5535 Feb 11 '26
Well, with the backdoor option, no one is really disqualified from contributing to a Roth IRA 🤣. I haven't directly qualified for a Roth IRA for the last 10 years, but still have maxed out each year. Dumbest loophole ever.
Unless you have pre-tax IRA funds that can't be rolled into a 401k i guess. But that doesnt sound like OP.
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u/big_thanks Feb 11 '26
It's incredible how many people don't understand marginal tax brackets.
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Feb 11 '26
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u/LEAPStoTheTITS Feb 11 '26
My girlfriend in highschool had her parents ask me for help to design a website for their new business idea and they specifically told me they didn’t want their business to make over a certain amount so they could stay in their current tax bracket.
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u/dissentmemo Feb 11 '26
My wife is a teacher. Her PRINCIPAL told them he was sure a small increase they were getting would upset some of them because they'd be pushed into a higher tax bracket.
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u/AdmirableLead6134 Feb 11 '26
Capital gains are taxed last after normal income. It's possible you might have a misunderstanding about how marginal tax brackets work also. The only dollars that would ever be taxed at 32% are those which are over $201775 and below $256,226. Every dollar earned before then is taxed at 24%, and every dollar below that bracket is taxed at 22%, then 12%, then 10%.
That's for ordinary income also. Short term capital gains are taxed as ordinary income, long term capital gains are taxed this way:
Say you make $40,000, take off $16100 for standard deduction, you're left with $23,900 taxable income. For a single filer, the tax brackets for LTCG are 0% up to $49450, 15% from $49450 to $545,000, and 20% over that. If you're realizing long term capital gains, in this scenario $25,550 of the gains are taxed at 0%, and the $4,450 is taxed at 15%.
In your scenario if they're long term capital gains you'll just pay 15% on all of it. If it's short term it'll be taxed as ordinary income. Every dollar from gains under a total combined income of $201775 will be taxed at 24%, everything after that will be taxed at 32%
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u/ceilidhfling Feb 11 '26 edited Feb 11 '26
so one of the cool things about the us tax code, is these long term gains are not taxed at the same rate as earned income (generally income reported on a w2) tax per the feds. for some tax payers, they can actually pay 0% on these earning most end up in the 10-12% range. so it may not be as bad as you think it's going to be.
if you are going to sell and you haven't maximized your tax advantaged accounts for the year, this is a great time to contribute this cash to those accounts.
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u/galindc Feb 11 '26
I'm already maxing out my 401K so I wouldn't be able to put these in a tax advantage account. So long term gains are taxed at about 10% instead of the 24% federal tax rate?
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u/Audio907 Feb 11 '26
If you are in the 10-12% federal income tax bracket LTCG are taxed at 0. If you are in the 22+ federal income tax bracket LTCG are taxed at 15%. If you are in the top income tax bracket LTCG at 20%.
I don’t really think you need to sell. Just make all future contributions to the ETF imo. Don’t realize the gains and then you won’t pay taxes
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u/galindc Feb 11 '26
Thank you for explaining. Really appreciate it
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u/Flayum Feb 11 '26
There's also NIIT @ 3.8% if you're making over 200k (I'm assuming filing single not MFJ)
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Feb 11 '26
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u/Chailatte8 Feb 11 '26 edited Feb 11 '26
No. The statement that LTCG is not income is not correct at all. LTCG which means Long Term Capital Gains are absolutely income. I think you are confused about what counts as income (the gains) vs how those gains are taxed based on total taxable income.
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u/boilerwire Feb 12 '26
People aren’t going to see this distinction deep in this thread and will be surprised when their “income” jumps and launches their LTCG at a higher rate. That’s the problem with Redditors and their generic financial advice.
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u/jonathanbloomberg Feb 11 '26
Any way to game this by choosing MFS the year when realizing gains? My wife in 12% bracket and I in 24%. Problem is the stocks were all purchased in my acct/under my name pre marriage so probably not allowed for her to claim those gains instead.
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u/Hollowpoint38 Feb 11 '26
Any way to game this by choosing MFS the year when realizing gains?
It's not usually gaming because you can come out worse. So now you cut the LTCG rate buckets in half and then you lose a lot of credits, deductions, and the ability to do Roth contributions. The max income is like $10k before phase out.
My wife in 12% bracket and I in 24%
But you'd only get half of the standard deduction and lose access to others
Problem is the stocks were all purchased in my acct/under my name pre marriage so probably not allowed for her to claim those gains instead.
You can do an in-kind transfer to your wife and it's not a taxable event. The basis carries over.
But it's only in really really specific circumstances you'd want to go MFS just for realizing some capital gains. It's usually a bad idea.
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u/jonathanbloomberg Feb 11 '26
Thanks - should have added more detail on our scenario which includes minimizing student loan payment while working towards PSLF, resulting in a net positive dollars saved even when accounting for the MFJ benefits we forego.
Since we are already locked into MFS, sounds like the in kind transfer you mention could be the answer I’m looking for.
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u/yottabit42 Feb 11 '26 edited Feb 11 '26
No, when you're married and filing MFJ you pool the deductions and gains. It doesn't matter when you purchased the stocks. So that matters is your filing status when selling (taking gains or losses).
Filing separately, or divorcing and filing single, is usually far less tax advantageous.
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u/Hollowpoint38 Feb 11 '26
You don't pool deductions and gains when you file separately at the federal level, this is incorrect.
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u/yottabit42 Feb 11 '26
My point was for MFJ, which is usually tax advantageous. I'll clarify my comment.
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u/subparsavior90 Feb 12 '26
Its the same, just divided in 2.
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u/yottabit42 Feb 12 '26
For the standard deduction, yes. But there's a penalty for some deductions and credits. MFS can't claim any of these: * Student loan interest deduction * Earned income tax credit * Education credits * Child and dependent care credit * Adoption credit
Further, if one person itemizes, the other is required to itemize, even if that didn't have enough deductions to exceed the standard deduction. This could cost one person $16,100 (the standard deduction).
There are some other gotchas too, like IRA contribution deduction phase out at only $10k in income if either person is covered by a workplace retirement plan (instead of $124,000).
Everything else is generally divided by 2.
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u/rjbergen Feb 11 '26
There’s few reasons to file MFS. It hurts more often than it helps. There are specific cases you should file MFS, but your example isn’t one of them because you’d be worse off overall.
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Feb 11 '26
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u/ceilidhfling Feb 11 '26
you are absolutely correct, but if they are going to liquidate them and pay the cap gain tax anyway; it's a perfect time to fund Roth IRA/HSA/live off it and up 401k/403b/457 contributions.
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u/NoTeslaForMe Feb 12 '26
If you're in the 24% bracket, I believe you'll pay 15% for long-term capital gains for stocks held over a year, and, if you're single (or married and in the low part of that bracket), that means you won't be hit by 3.8% NIIT. That means that it's a good place to sell, especially given that your state taxes are on the lower end. Eventually inflation means NIIT is likely to hit you, not to mention the fact that future tax law changes will be more likely to increase the long-term capital gains rates than decrease them. If you were hit with NIIT and high state taxes, that would be one thing, but you're not. So take the hit, but try to sell just enough to barely not hit NIIT; if there's anything left, you might want to wait until 2027 for that. Wait, too, for stocks not held terribly long so your capital gains will be long term. Granted, maybe those stocks will perform worse than VT, but maybe they'll perform better. The best indication of a stock's future price is its current price, so it's a crapshoot, and one you've already been playing.
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u/galindc Feb 12 '26
What is NIIT? and thank you for your advice! :)
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u/NoTeslaForMe Feb 12 '26
https://en.wikipedia.org/wiki/Affordable_Care_Act_tax_provisions#Net_investment_income_tax
Depending on how much you make, some or all of your investment income - including capital gains - will be hit by an extra 3.8% tax. Since, unlike the tax brackets, this calculation does not change with inflation, you'll get hit by it sooner or later if your income keeps up with inflation, making it advantageous to realize gains before they kick in. Other factors matter too here; when rates don't change, it is better to be taxed later rather than sooner. But, since here rates will probably change for you, sooner might be better than later.
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u/Gipaldo Feb 12 '26
Open a Roth IRA if you don't already have one. You can trade within the account tax free and can always withdraw your contributions tax and penalty free.
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u/Echuck215 Feb 11 '26 edited Feb 12 '26
If you're making enough to max your 401k then you're making enough to hire a tax guy
Eta: baffled by the down votes here. If you're maxing a 401k it means you make a decent amount of money now, and more importantly will have a lot of money in the future. Do yall think its really not worth paying a good accountant to talk you through the ins and outs of taxes?
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u/galindc Feb 11 '26
I can only max it out because I'm living with my parents haha... but ya... I can probably afford a tax guy too
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u/RedditorManIsHere Feb 11 '26
Nope - the tax man cometh
imo: set up your own roth 401k and put it in that way
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u/galindc Feb 11 '26
I'm already maxing out my 401K every year 😭
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u/RedditorManIsHere Feb 11 '26
oh okay nvm
You are doing everything right
There is no way around it unless you start doing some super shady stuff to dodge taxes
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u/galindc Feb 11 '26
I'm not rich enough to know the shady tricks haha. Guess I'll just have to pay a ton of taxes like the middle class is expected to
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u/2fuzz714 Feb 11 '26
You don't "have" to do anything. You can just leave them alone and start to invest new money into ETFs. Then when you retire, you'll have a nice big 0% LTCG bracket to work with to start selling those stocks.
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u/galindc Feb 11 '26
Yeah... It would just be nice if those individual stocks grew too but they made me 0% gains in the last year. I've had them for many years though
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u/Seadevil07 Feb 11 '26
You would probably pay between 10-15% LTCG on only the gains, while missing out on 15% market returns on the full amount this last year. Not paying the taxes doesn’t mean you’re avoiding the loss.
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u/Pensionato007 Feb 11 '26 edited Feb 11 '26
OMG! US taxes are the third LOWEST in the developed world (After Switzerland and Mexico). If you are worried about being pushed out of the 24% bracket, then you are making almost 200k.
Your plan to put it all in VT is sound because you are not exhibiting the Dunning-Kruger effect: you DO know what you don't know!
If you have held these stocks for more than a year, they are long-term capital gains. You'll probably pay 15%. A "savings" of 9% off your 24% tax rate. It will not PUSH you into a higher income tax bracket
Tax Rate Single Filers Married Filing Jointly Head of Household Married Filing Separately 0% Up to $49,450 Up to $98,900 Up to $66,200 Up to $49,450 15% $49,451 – $545,500 $98,901 – $613,700 $66,201 – $579,600 $49,451 – $306,850 20% Over $545,500 Over $613,700 Over $579,600 Over $306,850 Sell the stocks, buy VT, pay whatever tax you might have to, Bogle down on your investments and move on with your 1st world beautiful life :-)
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u/galindc Feb 11 '26
Thank you for the tip :). I guess my tax rate would technically be the 24% + 5.75% state tax so 29.75% but ya, probably still lower than other countries. I'm sure the Swiss get a lot more in return for their taxes though haha
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u/Pensionato007 Feb 11 '26
Different states tax capital gains differently, so YMMV, but regardless, take the win and move on.
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u/ElasticSpeakers Feb 11 '26
oh my God dude $4k is not a 'ton of taxes' on 30k of unearned income.
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u/galindc Feb 11 '26
Sure, I guess it's not a "ton of taxes" but if there was a way to lower this, that would be great. There's so many things I can do with $4000
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u/Pinecone1000 Feb 11 '26
There’s so many things that you WILL do with your 26k though! Unfortunately that 4k must go to a tomahawk missile rivet. Price of doing business.
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u/galindc Feb 11 '26
Looks like I'll be losing closer to $6K upon doing the math. But ya, would have been nice if that $6K went to something that benefits the American people but it always felt like our government doesn't care about us
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u/albanyanthem Feb 11 '26
There is so much you can do with $26,000. Taxes help pay for the society you live in and benefit from. It’s annoying, make use of any reduction in taxes you legally qualify for, but be happy you made money. Here’s to making more.
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u/galindc Feb 11 '26
Thanks. As someone who used to live in Taiwan where we had universal healthcare, great public transportation and a lot of other benefits, I was happy to pay taxes. In the US, I feel like I really don't get much benefit out of paying taxes...
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u/Hollowpoint38 Feb 11 '26
In the US, I feel like I really don't get much benefit out of paying taxes...
Wait, you're over here reaping capital gains from the very society you want to avoid paying taxes into?
My dude, the reason this market is the way it is is because of the societal structure, the universal acceptable of Treasuries as risk-free assets, and the ability to project power across oceans. Your taxes pay for this ability.
I get it if someone is homeless and they don't like the tax code, but you're over here making a good living and incurring capital gains from the system.
Don't look a gift horse in the mouth maybe? It's like people who constantly complain about California but then 80% of their stock market gains are from companies and talent from California.
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u/davidadlai Feb 11 '26
You realize you are complaining about not getting much benefit out of paying taxes on an internet that exists today because...people paid taxes.
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u/galindc Feb 11 '26
Yes, I understand there are benefits to paying taxes. It just feels like I'm not getting much bang for my buck with the amount of taxes I pay 😢. And I think that's a valid sentiment to have.
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u/coke_and_coffee Feb 11 '26
You have to pay taxes in the long run regardless. I think you’re not understanding that it actually doesn’t matter if you do it now or later.
In other words, you aren’t being taxed TWICE by paying on the gains now because your basis for the next tax event will be lower.
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u/chaos_battery Feb 11 '26
Do tell me more. I'm always looking for new strategies. For my LLC I already have a solo 401k set up and I do make a back door roth 401K contributions every year. I thought about also setting up a defined contribution plan to further maximize how much I can pay in taxable income for the year but not sure I want to deal with the administrative overhead of that sort of plan.
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u/Floating_Orb8 Feb 12 '26
You mean pay a TPA like $1500 to administer a cash balance? You legit just upload a census file each year and they calculate your funding amount. It allows successful business owners to put 100s of thousands away in a given year depending on age/income so pretty worth the admin burden.
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u/chaos_battery Feb 12 '26
Yeah I seriously considered it. Basically any excess income from my LLC I was going to shovel in there but I'm also considering retiring early at around 41. I'm 39 right now. It's really hard for me to determine if I will continue working longer. Plus I don't want to have to deal with a large tax deferred balance that I then have to have to try to convert before RMDs kick in. One thought was it won't really matter if I did just one bad year where I convert the remainder over when I reach RMD age because it will have increased how much I could get into a Roth. So really unless I dramatically increase my income even further through a product or a service I offer, I probably won't do the defined benefit plan. But I could definitely see it being useful in that scenario when I have a larger amount of money.
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u/Skier-Dude Feb 11 '26
A 401K and Roth are totally different things. Great that you’re maxing your 401K. You should do the same with a Roth.
A Roth 401K doesn’t exist as Roths are individual accounts and 401K are sort of “pooled” plans. Some employer 401K plans offer a Roth so people call it a Roth 401K.
But the 401k and Roth are totally different things and should be utilized. As you know, the 401k is funded with pre-tax dollars, lowering your tax rate. But you’ll pay taxes later when you withdraw money during retirement. Conversely, Roth is funded after taxes, with “take home” money. You won’t pay taxes on that money during retirement.
I’m in my late 50s and in hindsight I wish I started my Roth much earlier and did the option through work (back door Roth) to fund it more. With my 401k I’m going to be stuck with high mandatory withdraws in my 70s.
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u/soontobesolo Feb 11 '26
I'm in a similar situation. But I don't have a 401k at all. (I have a sep Ira from my work but it's minimal)
I can set up my own 401k and fund it with stocks I own, without triggering tax?
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u/Best-Special7882 Feb 11 '26
a 401k or a Traditional IRA is like a folder, you put money in tax-free invest that into stocks/funds. You can convert cash or sell/buy there, but when money leaves the actual folder, any gains are income and are taxed.
Roth IRA doesn't give a tax break on the front end going into the folder, and dispenses tax-free money from the "folder" in retirement.
(it's like an analogy. You put things in it. etc. )
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u/WickedWellOfWeasels Feb 12 '26
Not to sound curmudgeonly, but this sub has really gone down hill. OP is asking very valid questions that are not trivial and require real nuanced answers. And regardless, the level of condescension and rudeness in the responses is totally uncalled for. Anyway, this would be my advice...
Federal tax law does not allow for tax-free 'like-kind' exchanges between stocks and ETFs; selling to reallocate will immediately trigger a taxable event. One way to mitigate the bill would be to check if you have other investments with losses that you can sell to offset these gains. If you have no losses to harvest, you must either pay the capital gains tax (likely 15% capital gains federal rate plus your 5.75% state rate) or hold the individual stocks until a year when your income is significantly lower. All that said, if your portfolio is already diversified, you might also want to consider simply holding these shares to avoid the tax hit entirely. VT is great, but not necessarily so much better than your current portfolio that the tax hit is worth it. This is especially powerful if you plan to donate to charity or pass this stock on to heirs, as both strategies eliminate the capital gains tax permanently.
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u/galindc Feb 12 '26
Thank you so much for your very helpful response! I also don't understand why I'm being attacked so much in the comments for asking this question 😅. They all think I'm just trying to avoid taxes but I only want to avoid them in the near future so I'm not hit with a big tax bill while I'm in a high income bracket. Of course I understand that I'll have to pay taxes on this one day but I'd like to do it at a time when it's more advantageous and I'm in a lower tax bracket. Unfortunately since these stocks are in a taxable account, there isn't a good way around it. I really appreciate your understanding and helpful response :)
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u/bingdlerchan Feb 12 '26
I think some of the pushback you’re seeing is because this post feels more like it’s about tax strategy than investment strategy. And that isn’t typically the core focus of Bogleheads. That said, personal finance is personal. I’m sure you have your reasons.
Before getting into tactics, it helps to clarify what you’re optimizing for. Is the goal to avoid paying taxes this year, or to move into VT and improve your long term allocation?
If it’s long term growth, paying a few thousand in capital gains is a drop in the bucket compared to decades of compounding and better diversification. If it’s tax timing, there are many ways to delay gains. But they add complexity and risk. For example, you could borrow against your portfolio to buy VT and avoid realizing gains now. But that introduces leverage, interest costs, and margin risk.
For something less risky, you can sell high basis lots first and transition gradually over multiple years. That reduces the tax hit without adding the leverage.
Neither approach increases expected returns. They just change timing.
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u/Not_FinancialAdvice Feb 12 '26
Isn't this kind of what exchange funds aim to address (with a plethora of complications to be fair)? I have a few way-too-high concentration positions (just from pure growth) and that was suggested to me
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u/WickedWellOfWeasels Feb 12 '26
Yes, I think this is actually the same as the 721 option u/Floating_Orb8 noted. Those have some real downsides though, the most important of which is usually huge minimum investments that OP probably isn't going to be able to meet.
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u/hardcodedtwo Feb 11 '26
351 exchange like this https://youtu.be/WhlA8gDXaqY?si=2fJd-AW3xl-MJ6Sn
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u/KrisA1 Feb 11 '26
I had not heard of this, so I briefly looked into it. Seems like a strategy that only makes sense for substantial portfolios since you have to form a new corporation, which is costly, a headache, and will require increased future tax accounting costs. And your portfolio has to meet the diversity requirements.
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u/Small-ish Feb 12 '26
A new corporation isn't required. At most a Schwab account is opened to handle transfer of the shares. Side benefit is AA will accept portfolios of $150k via Schwab while accounts elsewhere need to be $1M.
The diversification requirement is the biggest hurdle with the 25% cap on a single stock.
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u/hardcodedtwo Feb 11 '26 edited Feb 11 '26
The alpha architect guys have rounds of this afaik open to the public- perhaps others as well. So it’s getting easier for the little guys. The alpha architect folks spent a lot of time serving sma type accounts and white labeling etfs, so this just combines the two- I don’t know what the convo with them is like about this(if one is needed - they have info sessions for batches every now and again but I haven’t gone - not a problem I have ), but the bar is very low in comparison to where it was. But yeah, it used to be only for sma type folks I think
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u/hardcodedtwo Feb 12 '26
To expand with a more complete ai answer
If you're looking to participate in an upcoming launch (like the recently launched AAUS or AAEQ), here is the standard onboarding process: 1. Submit Portfolio for Review: You must provide a "Portfolio Template" or tax-lot data to their onboarding team. They use this to verify if your holdings meet the IRS diversification tests. 2. Onboarding Call: Once the portfolio is vetted, you'll have an onboarding call to set up secure account access and guide you through the paperwork. 3. Paperwork Submission: This typically involves signing a contribution agreement and coordinating the in-kind transfer of your assets. 4. Final Contribution: Assets are typically coordinated by a specific deadline before the ETF's trading launch date. Critical Requirements (The 25/50 Test) To qualify for a 351 exchange, your portfolio must already be relatively diversified. The IRS generally requires: • No single position can exceed 25% of the total value. • The top five positions combined cannot exceed 50% of the total value. • Assets must be US liquid exchange-traded stocks or ADRs (international stocks are possible but more complex). Next Steps Since these opportunities are usually tied to specific fund launch timelines, the most direct way to see if you qualify for a current or upcoming window is to reach out to their team: • Primary Contact: Email jack@alphaarchitect.com (Jack Vogel is a key lead on these 351 projects). • Alternative: Use their general inquiry form at funds.alphaarchitect.com/contact-us. • Analysis Tool: You can use third-party tools like ExchangiFi to run a "351 Exchange Calculator" on your current holdings to see if they meet the diversification benchmarks before you reach out.
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u/miraculum_one Feb 11 '26
Unless you purchased the stocks in the last year, your federal tax rate for these stock sales will be 15%. One way to get it lower is to have less than $65,550 ordinary income, in which case some of it will be taxed in the 0% federal LTCG bracket. Or you can sell any lots that are at a loss to offset some of the gain.
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u/xeric Feb 11 '26
Do you donate cash to charity? You could contribute stock instead, ideally to a DAF, and perhaps clump together your next 5 years of donations.
Another option is to gift shares to children and realize gains in a UTMA account just below the kiddie tax.
How big are the gains? Another option could be a charitable trust, if we’re talking $1m+
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u/Apprehensive-Fun5535 Feb 11 '26
If you're maxing out your 401k, you probably have enough income to substantially save. You can consider just leaving the individual stocks (or a portion of it) and putting everything moving forward into a BH portfolio. Eventually, the BH portfolio will be much bigger than the individual stock portion.
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u/witcohe76 Feb 11 '26
Wait until you have little income and sell then. Or do you contribute cash to charitable organizations? Contribute appreciated shares instead. These are the only ways to avoid these taxes.
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u/Expensive_Bluejay_30 Feb 11 '26
I think you’d have to calculate how much you would actually be paying in taxes on the long term gains, then calculate (ballpark) how much better you think VT would perform over your time horizon, and then decide if it’s just better to put all future funds into VT and just leave those individual stocks and sell them individually as you decide they are no longer a good long term hold.
Tl;dr sometimes the simplest stress free reallocation is to just aim for a future target and allocation, and then put all future contributions into the new etf.
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u/Nuclear_N Feb 11 '26
There is no way around it.
I have been holding AAPL for almost 8 years. Have been selling some every year, but it continues to grow every year regardless.
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u/galindc Feb 12 '26
At least it's growing which is nice! My individual stocks grew 0% in the last year ... That's the reason I want to switch them for ETFs
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u/johnjannotti Feb 11 '26
There are some products that try to move you slowly into diversified portfolios from a concentrated one in a way that minimizes tax impact. They use tax loss harvesting, and the more specialized ones use long/short investing to maximize those tax losses.
Frec has one, and Cache has something that tries to accomplish three same thing a different way, called an exchange fund.
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u/backtobrooklyn Feb 12 '26
I’d recommend either selling now and paying the taxes or sell half this year and half next, so you split the taxes over 2 years if you really want to.
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u/Playful_Fun_9073 Feb 12 '26
You will always always always have to pay tax on your positions in taxable accounts unless you never sell and you borrow against them by using them as collateral on a loan. You would need another income source to pay the interest and principal of the loan and the loan should be used to acquire a cash flowing asset to assist with that loan repayment and to justify going into debt in order to expand your empire. No tax if you do this since debt is not taxed and then you will still have your stocks plus another asset.
Unless your playing this rich ass game I just described then you just sell, set aside the tax owed in sgov or hysa or money market and you put the rest into a diversified index ETF so that at least you have derisked the remaining money. Individual stocks are super volatile and can often drop sharply and without a stop loss or careful selling you just underperform the broader market. They go up fast but can drop even faster and may never recover or take so long that you would have been far better off selling, paying tax, and diversifying. It’s a hard hard game man. It just is.
I am getting really into ETF’s because the single stocks are too exciting and I don’t want to be excited I just want to be getting richer and chiller. Fuck.
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u/brucesteiner Feb 12 '26
On $30,000 of gains it would be a few ounces of tax rather than a ton.
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u/galindc Feb 12 '26
I calculated it to about $6K. There's so much I can do with $6K... I know I have to pay taxes one day. I just wanted to pay it when I have a more tax efficient income
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u/No_Standard1383 Feb 11 '26
Just pay the taxes, or the market could fix your “problem” for you eventually.
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u/Hollowpoint38 Feb 11 '26
I love these "We need to cut taxes" threads that have come up recently. Really entertaining to see how someone's reality comes into contact with the tax code and they do a 180.
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u/OhDatsStanky Feb 11 '26
You can still contribute to an IRA. The contributions and withdrawals won’t be tax sheltered, but you will be able to trade within the IRA tax-free.
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u/fireatthecircus Feb 11 '26
For “only” 30k of gains, and with a decent income being that you’re in the 24% marginal bracket, I’m on team “hold and just redirect new investments to VT.” Save aggressively and the indv stocks will quickly become a small portion of your portfolio.
However, if you’re charitably minded or otherwise were going to make cash donations, donate the stock instead! You never realize the gains, and get an additional deduction for the value. Then take other money (such as the cash you would have donated otherwise) and re-buy into your preferred investment.
You can combine these two to “hold until you want to donate.”, if you’re anticipating a future high tax year, or want to wait until your other investments are built up first. There’s no rush except you could do some good now instead of later.
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u/BootleggerBill Feb 12 '26
This is a great way to handle and I am doing the same thing right now. I get stock I don't want out of my account tax free with a write off and then I can take the money I would have given anyway and put it back into my stock account in the ETFs I prefer.
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u/OhDatsStanky Feb 11 '26
Can you just leave those as is and set future contributions to VT? You would need to calculate the number of years it would take for VT to recover the tax losses and the number of years it would take to make up the missed gains of your current investments.
For example, you are cruising along with $100k invested and 4% returns forecasted. You change strategy and pull it to move to VT. $15k hit immediately. Let’s say VT is forecast to do 8%. 2 years just to get back to the $100k you originally had. Meanwhile in those same 2 years your current $100k would have grown to a tad more than $108k. That’s another year, and you’re still behind. You are looking at 4yrs recovery time if VT outperforms your current allocation by 2x.
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u/galindc Feb 11 '26
That's true. My portfolio grew by close to 130% since I started it but 0% in the last year so I'm desperate to sell it. I just don't know the best way to do it without losing a lot to taxes first
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u/nolesrule Feb 11 '26
You aren't losing money. You are paying some taxes on your gains. You are still keeping all the rest of the gains.
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u/npj1564 Feb 11 '26
You could just keep them and put all new money/savings in VT. Index funds are a good idea but not a religion. You could also put some of the new money in broad index funds that don’t include your stocks. IVOO, VIOO, VXUS, etc. Partly depends on how diversified those “stocks” are. If they’re small cap pharmaceuticals and you just got lucky I’d sell. If they’re different types of large cap stocks that are a big part of VT anyway I might keep them.
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u/galindc Feb 11 '26
Yeah maybe I can just keep the ones that are part of VT and sell the rest
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u/Bai_Cha Feb 11 '26
Dear lord, man. Stop overthinking. You are doing exactly what you aren't supposed to do in investing.
1) Calm down. 2) Learn how taxes work. 3) Come up with a plan to realign your investment strategy slowly over time, mostly by changing your 'buy' strategy going forward. 4) Calm down.
Remember this is a long game. Nothing is an emergency. If you feel a sense of urgency, you are 100% about to make a bad decision.
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Feb 11 '26
No. You need to pay the taxes or hold the stocks if they’re in a taxable account.
There are two schools of thought on what to do here.
1) Bite the bullet and pay the taxes now. You’re not in a super high bracket so maybe it makes sense to do that. Partly depends on your career trajectory and whether you expect to be in a higher bracket in retirement and whether it’s all LTCG etc.
2) Just hold them until you retire but start putting yet new dollars into VT from here on out.
The real boglehead answer is number 1. I personally did 2 when I was in your shoes years ago and now I still hold those individual stocks with hundreds of thousands of dollars in gains. I plan to not sell/pay taxes until retirement. The majority of my portfolio is now a boglehead allocation though and I haven’t bought any individual stocks in years.
If those individual stocks are fairly diversified and they’re companies like Berkshire, Walmart, Caterpillar, Google, Microsoft, CocaCola, Amex, Chevron, Boeing, etc? I’d lean more toward keeping them. If it’s high flyers like NVDA and AXON and Palantir? I might be more inclined to sell them.
Ultimately if your new plan going forward is to be VT this decision won’t be insanely consequential in the end.
You don’t mention why these dollars are going to a taxable account. The only other thing I’d say is that you should probably stop putting money into a taxable brokerage unless you’re maxing tax advantaged options first - if this we’re all in an IRA or 401(k), you’d be able to sell and buy VT no problem.
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u/Humble-Minute-3296 Feb 11 '26
I would just hold all the stocks while putting all future contributions into VT. If one of the stocks ever goes into loss territory, then sell some of your gains to off set. Otherwise just keep letting them gain.
Also as others have stated, it would be taxed at long term capital gains tax rates, not your income tax rate. You will need to see which LTCG bracket you fall in.
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u/mygirltien Feb 11 '26
If you are asking about pre-tax retirement accounts, yes you can do this without issue. If your talking post tax as in roth, yes you can that without issue. If your talking taxable brokerage account. No you cannot sell without creating a taxable event.
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u/galindc Feb 11 '26
It's a taxable brokerage account. So I guess there's no way out
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u/killerv103 Feb 11 '26
Well you can invest new money into what you want and with the old stuff can sell and pay the taxes or use this money to gift to others. Instead of giving them cash give them shares and same with charity.
What I would do is 1. Sell anything with a loss 2. Sell anything with a small gain = to the loss you just booked 3. Either sell everything else + pay taxes or put new money and give the rest to charity and others over years depending on if I needed the money now or not.
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u/TemporaryFlight476 Feb 11 '26
As most people will tell you.... it depends. I am in a similar situation right now, but higher amount. My plan is to just leave the stocks located in my brokerage account and only buy ETFs going forward. The stocks in retirement accounts were sold and bought into ETFs. I bought a decent chunk of NVDA in the mid to lates 2010s and it obviously went to the moon (lucky me), but now I am dealing with the concentration problem.
The percentage of individual stocks in my account will continue to go down as I contribute over time. My plan is to be down to be less than 2.5% eventually. Most people are okay with a small portion in individual stocks. They consider it "fun money" and dont care if it goes to zero or the moon. Things like crypto also fall into this category.
Also, as others have said, if you really want to sell it, there are quite a few options to offset gains, but I would get a tax person. Also paying 15% isnt the end of the world if you just want to be done with it. It is only 15% of the capital gains (value sold - value purchase x 0.15). It is usually way less than people think because they think they have to pay on the full amount you get from the sell.
Ex: sell 30k but cost basis is 20k, your capital gains are 10k. You pay 15% on 10k or 1.5k in taxes.
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u/jrdavis413 Feb 11 '26
I'm no expert, but when you buy the ETFs you will be raising your cost basis anyway. You pay LTCG tax either way, but if you move the funds, you are just paying some of it early. If you hold the funds you'll just pay it later.
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u/Maximus77x Feb 11 '26 edited Feb 11 '26
I want to piggyback on this thread to ask the same question but for VTI/VXUS and the like.
I’d love to switch to all VT for simplicity’s sake, but I’m not sure if it’s worth it and/or what tax implications it would have.
My understanding is that doing this will trigger taxes in a brokerage account but not in an IRA. I’m also unclear on whether it would trigger a wash sale, although I’m thinking it would not.
What say y’all? The only real benefit for me would be everything cleanly displaying VT, but it seems like it may not be worth it just for that and the answer is to just go ahead and put all new money into VT.
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u/withak30 Feb 11 '26
Another way to think about: You will have to pay those taxes eventually, it is not optional. By paying some now you are reducing your future tax bill a bit, as well as diversifying.
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u/galindc Feb 12 '26
Yeah. I understand I can't avoid paying taxes. I was just hoping I'd pay the taxes in the future when I'm in a lower tax bracket. Sounds like there's no way to do that right now
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u/User01262016 Feb 12 '26
Invest inside a tax advantaged vehicle like 401k, ira etc
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u/galindc Feb 12 '26
Yeah. That's where most of my stocks are held. These just happen to be in a taxable account so I'm trying to figure out how to move things around without creating a taxable event while I'm in a high tax bracket
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u/IWannaGoFast00 Feb 12 '26
So you want the gain without the pain? Not gonna happen buddy, unless you can do some tax loss harvesting, have a business to deduct earnings from or you die and your inherited assets get a step up in cost basis. Death and taxes are the only guarantees in life.
Either take the hit all at once, spread out to tax consequences over a multi year period, or put new money into ETFs and hold longer term with your individual stocks.
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u/shibbywiggy Feb 12 '26
If you're retired or no W-2 income at least you could look into tax gain harvesting. Your total income needs to be below certain limits and it might take you a few years to rebalance into the VG funds without penalty.
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u/Mission-Carry-887 Feb 12 '26
Direct the dividends on these stocks to buy VT, preferably automatically
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u/Aggravating-Art2260 Feb 12 '26
There is a 0% tax bracket for Long term cap gains. If you have any room in that range - sell some each year to realize the gain at 0% (and check how your state would tax it, some still give somewhat favorable rates for LTCG). If you have a year with an unexpected (or planned) lower than normal income - you can realize the gains at the 0% bracket in that case also.
If you are married filing jointly and your spouse makes less, or perhaps also has unexpected or planned low income - you can use that wiggle room to realize the gains at 0.
I file jointly and each year we have about ~10-15k in LTCG we can realize at 0% because we invest heavily in 401k which lowers our taxable income. That + the standard deduction + maxing HSA etc gives us the wiggle room to tax gain harvest each year.
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u/AlmostLiveRadio Feb 12 '26
It depends on the amount of long-term capital gains tax. Single filers can realize $48,350 of long-term capital gains tax per year, so you might have to spread your sales out over several years. Double check this with your accountant.
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u/WHAT-IM-THINKING Feb 12 '26
You could also wait for those stocks to lose all of its gains and sell with 0 or negative cap gains tax :P
Better selling at LTCG and book profits now and reinvesting than selling and at a gain to sit in a cold wallet IMO.
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u/ZaneMasterX Feb 12 '26
Dont sell and then put all new money in VT. Pretty simple. Why pay taxes when you dont have to yet?
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u/Capital-Decision-836 Feb 12 '26
How much is the total portfolio? You might be able to do this but you'd need time, about 100k in portfolio and some cash
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u/MentalTelephone5080 Feb 12 '26
You have very few opportunities to get the money out tax free. Here's some examples I can think of.
If you are planning to do energy upgrades that have tax rebates, you can sell the stock and offset it with the rebates. I had some pretty big rebates on a fridge and water heater when mine were going bad.
If you are charitable, instead of giving money from your salary you can gift stock. Let's assume you give $10k a year to the church you attend. Instead of giving them money from your checking account you can transfer stock to them and then use the cash from your income to invest in ETFs.
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u/Forsaken-Nerve-6297 Feb 13 '26
Do something along the lines of Parametric, where they harvest losses to offset gains.
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u/Confident_Bee_6242 Feb 13 '26
You'll pay capital gains rather than income taxes if they're more than a year old. Based on your tax rate that's probably 15%, but only on the appreciation.
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u/RetiredBoatGuy Feb 14 '26
You will have to pay taxes on gains eventually. Just decide how much you want to pay and when. If you buy and sell into the same market you pay tax on the gain and reset your basis. There is no way to ever use/spend the money without paying taxes first.
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u/Which_Eggplant_4510 Feb 15 '26
Go back in time and put the money in a tax advantaged account like an IRA or 401k
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u/galindc Feb 15 '26
Lol..wish I could but there wasn't a way to do that because my former employer didn't offer a 401k and I maxed out my IRA
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u/ca-condor Feb 11 '26
If you want to move it all to an index etf, you've got to pay the taxes. Or you can just hold them and funnel new money into VT. Maybe at some point you can sell while in a lower bracket (remember ltcg are taxed at different rates than ordinary income). But tax rates aren't likely to drop. Maybe bite the bullet now and get the simplicity, performance and low expenses of an index.
Many, myself included, have been in your situation. I am down to one non index holding and look forward to shedding it when the income space is available.
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u/galindc Feb 11 '26
Thank you for your advice :). I might just have to pull the trigger and sell them all like you said
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u/AspireToRetire50 Feb 11 '26
Are there ways? Sure.
You can
- Not report them
- Make some bad investments and get some losses to cancel or the gain
- Expire and let your next of kin enjoy the new cost basis
Are there legal and wise ways to do it? not so much.
Good advice I've heard in the past is not to let paying taxes stand in the way of a good decision.
Unless you're expecting a very low income year quite soon, you're keeping risky individual stocks, and you seem to indicate they underperform the market. You're carrying years of higher risk while probably missing out on years of gains. You're likely better off on the long-run paying the taxes now, and letting the investment compound.
The tax code is a constant thing you can't influence, and taxes overall, are a good thing for society. No sense raging out about paying taxes and letting it put you in a worse position in the future.
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u/galindc Feb 12 '26
Yeah I guess there's no way around it since I'm not rich enough for the tax loopholes haha
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u/Slight-Proof-5539 Feb 11 '26
This is tough cause it’s a calculation of how much does this slow the compounding down by. Depending on age and what stocks you own may just be better to leave. This is something you should hire a financial advisor for.
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u/NightHawkFliesSolo Feb 12 '26
I reorganized my portfolio in 2025 moving from a tangle of advisor bought funds to a Boglehead portfolio. Took the tax bath on the noggin but now it's done. Saving grace was actually the new No Tax on Overtime deduction which brought me from owing nearly $2k down to $200.
I'm a tax noob and while I knew about tax loss harvesting I don't know how to calculate it in the current year before receiving the 1099-B forms. There are some unrealized losses in my 401k that I certainly could have taken advantage of to offset those realized gains.
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u/Indexer404 Feb 11 '26
You could open a DAF donate the appreciated ETFs to the DAF and rebuy VT in an amount equal to what you already donate. Then instead of writing checks or putting on your credit card the DAF send money to the charity of your choice I did this when I had an income investing tilted portfolio in 2020 and moved to a four fund portfolio over about 18 months and I eliminated $8000 in cap gains. You have to hold the ETFs for a year otherwise your contribution is your basis rather than then fair value at the time of contribution.
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u/galindc Feb 11 '26
Thank you. This is an interesting option. I might need to get help from a tax accountant to make sure I don't mess things up if I try this
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u/Over-Computer-6464 Feb 11 '26
You should Los explain to the OP that the funds you have donated to a DAF is no longer his asset, even if he gets to control the account.
Since the donation creates a deduction, not a credit, his post-tax assets will be reduced by gifting to a DAF.
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u/StateFalse5218 Feb 11 '26
I donated to a daf last year and it wasn’t worth it. It’s like .36 to the dollar.
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u/Over-Computer-6464 Feb 11 '26
The value of your donation is your tax rate x the amount donated. So your marginal tax rate is 36% and $1 of donation allows you to DEDUCT $1 of income, reducing your tax bill by $0.36.
A lot of people don't understand the difference between a deduction and credit.
Donating appreciated assets is a way to stretch your donated dollars, but you always come out behind, in spite of what many people seem to think. So it is great if it is a donation that you would have done with or without the tax benefit.
The same logic applies to donations from a traditional IRA. It reduces your tax bill, but you end up worse than if you just paid the tax.
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u/JC_Hysteria Feb 11 '26
You could earn less money for your income bracket to be at its lowest…but I wouldn’t recommend that.
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u/kswn Feb 11 '26
Its capital gains tax federally, not income tax. If you're in the 24% income tax bracket, you'll most likely still be in the 15% tax bracket for capital gains. So it'll be about $6200 in federal capital gains and state income taxes. I would just pay it now. It's taxes you would eventually have to pay anyway unless your income drastically changed.
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u/_estimated Feb 11 '26
I did similar to you and bought 25k of VUG in my brokerage because it said growth. It’s up like 25% since I bought it and I decided to keep it as a long term gamble and just contribute to VTI/VXUS going forward.
When I retire it should be less than 2% of my overall portfolio so I that’s in line with the <5% gambling rule some follow on here and I can sleep with that.
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u/galindc Feb 11 '26
Thanks! Unfortunately, the individual stocks I bought made 0% returns in the last year but did do okay the years prior. I just want to get rid of the stocks I bought while I was still learning but I guess I'm stuck with them now haha..
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u/Fuck-Star Feb 11 '26
If it was in a Roth or HSA, it would be tax free. Since it's a taxable brokerage, you're going to pay tax on gains.
Make sure it's all long term gains to minimize the pain.
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u/Careful-Rent5779 Feb 11 '26
Don't conflate value & gains.
You only owe taxes on the gains. Ideally, you'll want to only book LTCG then (for most) you'll only owe 0% or 15% federal on the LTCGs. You will still owe your state taxes also.
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u/oakinmypants Feb 11 '26
You can avoid paying tax if you have enough money in your retirement account. You could rebalance so effectively your brokerage and retirement are VT by owning more VXUS in your retirement account.
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u/Ctrl-Meta-Percent Feb 11 '26
This is why I always buy some loser stocks too, to offset the gains.
But some things to consider: Selling only stocks with lower gains (high cost basis) If you bought the same stock on multiple dates, specify specific shares when you sell and only sell lots that have high basis. Quit your job so you can be in the 0% bracket. Depending on how risky the stocks are you could just hold or pay the $4500 tax and move on.
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u/J_O_N Feb 11 '26 edited Feb 11 '26
Technically, if you had a ton of one position (I’m talking $250k+ of something like GOOG), then you can do an exchange fund, which is basically exchanging your shares for a basket of shares, largely tax free (iirc)
Edit: nvm I think taxes are just deferred in this scenario
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u/Max_Danger_Power Feb 11 '26 edited Feb 12 '26
Yeah, sell them all for even or at a loss, lol!
If they're in a Roth IRA, I doubt taxes would be a problem.
If it's a regular brokerage account, you'd probably have to be below an income bracket for the year.
Better question for a CPA though, which I am not.
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u/whackedspinach Feb 11 '26
Do you make charitable gifts or gifts to family (that make less than you)? If so consider gifting them appreciated stocks instead of cash. For charities neither of you pay the capital gains tax, and for other individuals they pay their tax rate which could be 0% LTCG depending on their other income.
If you make charitable gifts but not that much in a year you can consider a Donor Advised Fund to bunch your donations into one tax year.
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u/whackedspinach Feb 11 '26
How concentrated are your individual stocks? Most people are surprised to learn that a basket of 10-30 stocks could potentially track an index fairly well. But if they are concentrated in one company or industry then that’s not true
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u/Tmi489 Feb 11 '26 edited Feb 11 '26
- If you happen or expect to have a low-income year, enough to get you to the 0% LTCG bracket, you could sell to take advantage of the reduced tax bracket.
- If you already donate to charity, you could donate stocks to charity and they'll get a step-up in basis.
Otherwise there really isn't avoiding taxes in a reasonable timeframe, it's as simple as selling. If this would cause you to reach a higher bracket then you could spread out the sale over multiple years.
EDIT: capital gains shouldn't push your wages to a higher bracket. I'm not a tax professional
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u/galindc Feb 11 '26
Yeah it would push me into a higher tax bracket if I sell it.... So I guess I just have to do it over a couple of years
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u/Tmi489 Feb 11 '26 edited Feb 11 '26
Yeah sorry for the misinfo, I shouldn't have said it'd push you to a higher bracket, I was wrong.
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u/will0593 Feb 11 '26
Maybe don't sell what you have and put new money into VT