Taxes & Account Types
The account wrapper often matters more than the investment. Capital gains, retirement accounts, and basis rules.
13 terms in this unit.
Capital Gain (Short-Term vs. Long-Term)
Profit on a sale, taxed by how long you held it.
Cost Basis
What you paid, used to compute gain or loss on sale.
Wash Sale Rule
A loss is disallowed if you rebuy the same security within 30 days.
Tax-Loss Harvesting
Realizing losses to offset gains and up to $3,000 of ordinary income.
Qualified Dividend
A dividend taxed at long-term capital gains rates.
Traditional IRA / 401(k)
Deduct now, grow tax-deferred, pay ordinary income tax on withdrawal.
Roth IRA / Roth 401(k)
Pay tax now, grow tax-free, qualified withdrawals are untaxed.
Required Minimum Distribution (RMD)
Mandatory annual withdrawals from tax-deferred accounts starting at 73.
Step-Up in Basis
Inherited assets reset to market value at the date of death.
Health Savings Account (HSA)
Triple tax advantage: deductible in, tax-free growth, tax-free medical withdrawals.
529 Plan
A tax-advantaged account for education expenses.
Tax-Deferred vs. Tax-Free
Postponing tax versus never paying it.
Asset Location
Placing each asset in the account type where it is taxed least.