In times of unstable market conditions, investors have a natural desire to minimize costs. Including, due to the reduction of the tax burden. Today we will discuss some practical ways to legally reduce taxes that are suitable for beginner stock investors.
Note: in order to perform operations on the exchange, you will need a brokerage account – you can open it online. You can get acquainted with trading software without unnecessary risks using test account with virtual money.
Method # 1. Use losses
Taxes are calculated at the end of the year. The basic parameter is the financial result: income from the sale of securities and other financial instruments minus the cost of their purchase. If an investor bought, for example, shares, and by the end of the year had not sold them yet, such assets do not participate in the calculations.
The algorithm of action here may be as follows: if an investor made some transactions and earned money within a year, he would have to pay a tax. You can reduce it if some of the shares that he has in his portfolio have fallen in price by the end of the year. Then they can be sold – to fix the loss, and reduce the tax base. In the future, these shares can be bought back at a reduced price – if the investment strategy requires it.
That is, if you earned conditionally 30k rubles on the shares of one company, and if there is another transaction — if you close it now — there will be a similar loss, then the total tax will be zero.
In addition, article 220.1 of the Tax Code allows the use of losses from previous years to reduce the tax base of future periods.
Method # 2. Reschedule tax due date
As mentioned above – stocks in the investor’s portfolio do not participate in the calculation of income tax. But another important point is that the tax is withheld by the broker only when withdrawing money from the account. And at the same time, the broker compares the displayed amount with the total tax on the basis of the financial result for the year.
In practice, it looks like this: if an investor earned 500 thousand rubles a year, then the tax will be 65 thousand (13%). If the investor wants to withdraw 50 thousand rubles from the account, then it will be less than the total tax amount. In this case, the broker will retain 13% of the withdrawal amount (6.5 thousand rubles). If you withdraw 100 thousand rubles, then this is the amount of more than 65 thousand tax – and it will be deducted in full.
Method # 3: use preferential tools in investments
In 2020, there are several financial instruments in Russia, investments in which provide additional benefits.
These include, for example:
- Bonus Coupon Bonds. Coupons on government and municipal bonds, as well as coupons on some corporate bonds are not subject to personal income tax. List of such bonds is on the Moscow Exchange website.
- Securities of the innovative sector of the economy. There is a special securities register high-tech industry. The profit from the sale of such securities is not taxed if the investor has owned this asset for more than a year and sold it before January 1, 2023. Also, the tax does not need to be paid when selling after 2023, if the shares were owned by the investor for more than 5 years.
Method # 4. Use tax deductions
In addition to financial instruments with concomitant benefits, there is the concept of tax deductions. They can be obtained legally upon application or on the basis of a tax return.
One of the main tools for saving on taxes, including through deductions, is individual investment account.
IIA account holders can expect to receive two types of benefits. The first of these is a tax deduction (13%). To receive it, you need to deposit money into the investment account, as well as have an official taxable income (PIT). For example, if you deposit 400 thousand rubles on the IIS, then a maximum of 52 thousand can be returned as a deduction – for this you need a salary of 33 thousand per month. According to the rules, money must be in the IIS account for three years, it can be withdrawn earlier, but then the deductions will have to be returned.
That is, this benefit is suitable for passive investors who do not plan to make transactions.
Another benefit that is available when using IMS is exemption from income tax from transactions on the exchange. This is already a plus for those who would like to try their hand at investing on the stock exchange, but would like to optimize costs.
This article lists far from all the ways to legally reduce the tax base for investments on the stock exchange. If the topic turns out to be interesting, in the future we will talk about such tools as the settlement of tax bases or financial results when working with different brokers, etc.
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