Brokerage Account Closeout Fee Tax Deductible Or Not?
By moving my brokerage account from Wells Fargo to TD Ameritrade, I earned a signup bonus from TD Ameritrade, but I also had to pay a $95 account closeout fee to Wells Fargo.
I could’ve left the minimum amount necessary to keep the Wells Fargo account open and free, but because the signup bonus more than offsets the closeout fee, I chose to streamline. I closed both my Wells Fargo brokerage account and the Wells Fargo PMA checking account which I hardly use.
Now, is the brokerage account closeout fee tax deductible?
Brokerage Account Signup Bonus Taxable Or Not?
I’m following the lead from my own post Huge Bonus Offers From Brokers: Fidelity, Schwab, TD Ameritrade, ETrade, Merrill Edge. Although I’m satisfied with the service of WellsTrade brokerage account provided by Wells Fargo Advisors, the huge bonus offered by its competitors is just too good to pass up.
I moved my brokerage account from Wells Fargo to TD Ameritrade because TD Ameritrade pays a signup bonus of up to $1,000. An in-kind transfer does not involve any buy or sell. I still have the same investments. They are just held at a different place.
The transfer completed in less than 10 days. TD Ameritrade paid the promised bonus into my account on the same day the transferred assets arrived. The instant gratification felt really good. Now, is this bonus taxable?
Lifestyle Design: Choose Where You Live
Reader KD’s guest post about looking at the big financial picture really put many of my posts to shame. I post many small tips and tricks here and there but they often fall on the trees side rather than the forest. Most of them aren’t even trees, but twigs and leaves.
Getting an extra $5,000 in I Bonds via tax refund is cute and all, but how much difference does it really make? Suppose I Bonds pay 3% more than the alternative, which is really generous, getting extra $5,000 in I Bonds means getting an extra $150 interest a year. Does the extra $150 even register on these two pie charts KD shared with us?
Looking At the Big Financial Picture
[This is a guest post from long-time reader KD.]
In this day and age of financial blogs, coupon sites, and one-click online shopping, savings are easy to find and easy to replicate. The question I end up asking myself is what difference did these savings have on my bottom line? More often than not, in my case, the actual value is less than a couple of percentage points of the total annual spending. It is easy to forget the forest for the trees.
This is primarily because most often, the largest items in our spending are fixed such as housing payment, insurance payment, grocery shopping including non-food items, auto payment, gas and utilities. I call these necessities. Thanks to the rise in the disposable income of most U.S. households, this chunk has decreased considerably over the past few decades. But it still takes quite a big bite each and every month.
I hear, see and read in various personal finance programs on radio, on TV and on the Internet, about how rich I would get if I forego the latte every day and save the money. Sure, the idea is simple, easy to implement, and with guaranteed results. All you need is discipline! Umm, yeah! That is right, discipline! An exercise of will power, a resistance to frivolous temptation and a few calories you may do without. But we all know we have only so much of this discipline and will power. Wouldn’t you rather use it for something substantial?
Friday Reading: How Much Is Your Time Worth?
How much is your time worth? I faced this question yesterday as I attempted to participate in Microsoft’s Windows Phone Challenge. Microsoft was promoting mobile phones running its mobile phone operating system. If you can’t prove your phone is better than theirs, they will offer to swap your phone for theirs.
When I went to the Microsoft Store near me, there were probably 150 people in line. Winning the challenge is of course not the point. Everybody wanted to lose because they just wanted a new Windows Phone for free.
The line moved very slowly. I left after waiting for about 1 hour. Considering that a new no-contract Windows Phone is worth about $400, even waiting in line for 4 hours would earn $100 per hour, tax free (you can sell the phone on eBay if you don’t want the phone). That’s way above most people’s wage rate. Would you wait in line for 4 hours to earn $400?
Sitting Out the Roth IRA Movement Party
I woke up this morning hearing there’s a Roth IRA Movement going on in the bloggers circle.
I don’t have anything prepared, except I want to remind everyone not to forget The Forgotten Deductible IRA. Roth IRA is great if you aren’t eligible for a tax deduction for contributing to a traditional IRA, meaning
- you earn more than $66,000 (single) or $110,000 (married filing jointly) in 2011 in adjusted gross income ($68k and $112k respectively in 2012) AND
- you are covered by a retirement plan at work
Most people aren’t like that. 40% of workers don’t have a retirement plan at work. Last I heard the median household income is around $50k. $66k single and $110k married are way above median.
1099 Tax Form Packages From Vanguard, Fidelity, Wells Fargo, and E*Trade
I’m done with my taxes. I mailed the returns last week. With taxable investments and selling stocks from vested RSUs and ESPP purchases, it can get complicated. Any help from the mutual fund companies and brokerage firms would be welcome.
In this post I will review the 1099 packages I received from different companies — Vanguard, Fidelity, Wells Fargo Advisors, and E*Trade — for their timeliness, level of details, and helpfulness for preparing taxes.
Vanguard Funds
Friday Reading: Rent vs Own
My attempt to take a new job failed. The prospective employer not only would compensate just a small percentage of my unvested RSUs, but it also would pay less on an on-going basis. I was told that I should focus on the growth potential.
As much as I like the project, I’m not crazy enough to take a pay cut for it. If it’s a hot pre-IPO company, I might take a chance but not for an established S&P 100 company. A longer commute is another minus too.
We now continue with our regular programming …
Selling Noncovered Shares With Specific Identification At Vanguard
The IRS implemented new rules to help the taxpayers report capital gains and losses from securities sales more accurately. They did it by requiring the brokers and mutual fund companies to report the cost basis for securities bought after a certain date and subsequently sold. For stocks and ETFs, that date is January 1, 2011. For mutual funds, it’s January 1, 2012. The new rules of course only affect taxable accounts.
Brokers and mutual fund companies will report the cost basis for shares bought and sold after the cutoff date. Brokers will not report the cost basis for shares bought before the cutoff date no matter when you sell them; those shares are so-called "noncovered" shares.
You can still use all methods allowed by the IRS to track your cost basis. These include first-in first-out (FIFO), specific identification, and average cost (only for mutual fund shares). If a taxpayer wants to minimize the tax on a sale, specific identification is the best method to use. Because brokers and mutual fund companies aren’t required to do anything extra for the noncovered shares, the support you get on your noncovered shares vary from place to place.
The Best 529 Plan Age-Based Investment Option
Reader Vicki left this comment on my previous post 529 Plans: Age-Based Options Don’t Make Sense:
"I was just about to enroll in an age based plan here but pulled up your page before I signed on the dotted line. Help!! I just want this over with. I thought I had looked at all options and was satisfied with my decision until I read your article."
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