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Not founder's share I was granted equity award pre-IPO, and these are also RSUs so not even possible to do 83(b) at grant time I believe. So these all show up

Not founder's share I was granted equity award pre-IPO, and these are also RSUs so not even possible to do 83(b) at grant time I believe. So these all show up as W2 regular income, and on that note, it might be hard to do charitable, given the 'tax election' is set to 'sell shares to cover tax' which is the only option my employer set in the tax plan. So that amount that could be donated is not even available to me but is withheld and sent straight to IRS. I'd have to put my own money in to get the refund. Will be a big cashflow challenge given I'll do RE investments as well.

garmaine 6y ago
Why real estate? Unless that is something you really want to be involved with, I suggest looking elsewhere (like broad index equity funds). You might find https://reddit.com/r/financialindependence https://reddit.com/r/financialindependence relevant to your needs.
- tech_taxpayer 6y ago
  It's mainly because the tax code has much better treatment (or more remaining loop holes intentionally unpatched) for RE in particular, due to its depreciation and interest expense write-offs. Stock market in general has a slower avg return (if diversified) and much higher risk if undiversified. Tax loss harvesting would help generating write-off in these case, but wash sale is a constant stress to manage as well. Appreciate the subredit recommendation. Will check that out for sure.
  - garmaine 6y ago
    I think you’ve been misinformed. The stock market has had a consistently better return than real estate income on a broad basis since the Great Depression. Look at the performance of REIT vs. a total market index. Real estate is full of success stories because some people are fortunate enough buy specific housing complexes in winning areas. But that’s like picking stocks—there’s a lot more variability and you just hear about the success stories. If you diversify real estate you end up with something like a REIT, which as I said underperforms (by a large amount) a broad equities index. The tax arguments don’t really make sense. You get write-offs for losing money—whether it is depreciating structures or repair costs. There is no cost to stock ownership. Just buy and hold long enough to get the long-term capital gains rate.
    - tech_taxpayer 6y ago
      Yeah i think that makes a lot of sense - the main benefit on RE though is in the tax shield if you invest DIRECTLY so the tax benefits can pass through, vs. a REIT. The depreciation recapture can be avoided if you handle it in the correct way, e.g. 1031 exchange or hold. But I agree there's more risk and it's hard to be consistently on the winning side. On the stock market front, what's your current approach allocating things? e.g. Do you do more like a wealthfront / betterment type of portfolio, or something more sophisticated? Would like to learn more on that front for sure.
      - garmaine 6y ago
        But you’re not really gaining anything! Those purported tax benefits mostly aren’t. It’s more like “tax trade offs”. When an asset depreciates, yes you can write off the loss. However that lowers the cost basis, so you then pay taxes on it again when you sell. In the end you are getting to offset some current income taxes with future capital gains taxes. There is some benefit due to the differing tax rates, but that is offset by various costs along the way. It’s hardly a clear win. (And AFAIK REITs have the exact same tax situation, so it is comparable. Holding the REIT doesn’t let you pass through the tax benefit, but they are realized by the REIT and reflected in share price.)
        tech_taxpayer 6y ago
        yeah so two points on that, first the gain at sale can be avoided through 1031 sec of tax code, effectively providing tax shelter, similar to how unrealized gain in stock but even more flexible as it allows you to switch asset classes (like kind swap). Tax aside, there's also the leverage. I can put down 5% and loan 95% to get 100% of the return of investment with exceedingly low interest the federal banking system subsidized for housing as a necessity, vs. commercial loans, but essentially doing this as business endeavor. By the end of all that, I can even offset income with the interest expense, the only loophole on interest expense remained in tax code. So folks are doing this all day long. You can't really do that with stock, or you face the ridiculous rate in margin trade. The leverage plus tax benefit allows wealth accumulation over time.

garmaine 6y ago

Why real estate? Unless that is something you really want to be involved with, I suggest looking elsewhere (like broad index equity funds). You might find https://reddit.com/r/financialindependence https://reddit.com/r/financialindependence relevant to your needs.

tech_taxpayer 6y ago
It's mainly because the tax code has much better treatment (or more remaining loop holes intentionally unpatched) for RE in particular, due to its depreciation and interest expense write-offs. Stock market in general has a slower avg return (if diversified) and much higher risk if undiversified. Tax loss harvesting would help generating write-off in these case, but wash sale is a constant stress to manage as well. Appreciate the subredit recommendation. Will check that out for sure.
- garmaine 6y ago
  I think you’ve been misinformed. The stock market has had a consistently better return than real estate income on a broad basis since the Great Depression. Look at the performance of REIT vs. a total market index. Real estate is full of success stories because some people are fortunate enough buy specific housing complexes in winning areas. But that’s like picking stocks—there’s a lot more variability and you just hear about the success stories. If you diversify real estate you end up with something like a REIT, which as I said underperforms (by a large amount) a broad equities index. The tax arguments don’t really make sense. You get write-offs for losing money—whether it is depreciating structures or repair costs. There is no cost to stock ownership. Just buy and hold long enough to get the long-term capital gains rate.
  - tech_taxpayer 6y ago
    Yeah i think that makes a lot of sense - the main benefit on RE though is in the tax shield if you invest DIRECTLY so the tax benefits can pass through, vs. a REIT. The depreciation recapture can be avoided if you handle it in the correct way, e.g. 1031 exchange or hold. But I agree there's more risk and it's hard to be consistently on the winning side. On the stock market front, what's your current approach allocating things? e.g. Do you do more like a wealthfront / betterment type of portfolio, or something more sophisticated? Would like to learn more on that front for sure.
    - garmaine 6y ago
      But you’re not really gaining anything! Those purported tax benefits mostly aren’t. It’s more like “tax trade offs”. When an asset depreciates, yes you can write off the loss. However that lowers the cost basis, so you then pay taxes on it again when you sell. In the end you are getting to offset some current income taxes with future capital gains taxes. There is some benefit due to the differing tax rates, but that is offset by various costs along the way. It’s hardly a clear win. (And AFAIK REITs have the exact same tax situation, so it is comparable. Holding the REIT doesn’t let you pass through the tax benefit, but they are realized by the REIT and reflected in share price.)
      - tech_taxpayer 6y ago
        yeah so two points on that, first the gain at sale can be avoided through 1031 sec of tax code, effectively providing tax shelter, similar to how unrealized gain in stock but even more flexible as it allows you to switch asset classes (like kind swap). Tax aside, there's also the leverage. I can put down 5% and loan 95% to get 100% of the return of investment with exceedingly low interest the federal banking system subsidized for housing as a necessity, vs. commercial loans, but essentially doing this as business endeavor. By the end of all that, I can even offset income with the interest expense, the only loophole on interest expense remained in tax code. So folks are doing this all day long. You can't really do that with stock, or you face the ridiculous rate in margin trade. The leverage plus tax benefit allows wealth accumulation over time.