{ "media_type": "text", "post_content": "Potentially dumb question here: I am starting law school soon and will not be employed (net income of $0 assuming I don’t get a good summer internship next summer). Does it make sense for me to sell my personal investments next year (assuming my income will still be zero) so I’m paying a 0% capital gains tax rate? I’d just rebuy all of the same stocks immediately… am I missing something?", "post_id": "6109e5357e8295002a7abbe0", "reply_count": 32, "vote_count": 2, "bowl_id": "5b3f7377ab53db00136f7b4c", "bowl_name": "FIRE Financial Independence Retire Early" }

Potentially dumb question here: I am starting law school soon and will not be employed (net income of $0 assuming I don’t get a good summer internship next summer). Does it make sense for me to sell my personal investments next year (assuming my income will still be zero) so I’m paying a 0% capital gains tax rate? I’d just rebuy all of the same stocks immediately… am I missing something?

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Yes, wash sales only apply to losses. If you have pre tax 401k, I’d consider doing Roth conversions instead or perhaps in addition (I.e., up to standard deduction for Roth conversions and then pop gains to the top of the 0% cap gain).

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All of your 401k match would be traditional contributions so you should convert that

Yes, I'd first try to convert 401k into a Roth if your plan allows for in-service withdrawals. Then capital gains harvest whatever you can in the 0% capital gains range. Don't forget about the standard deduction lowering your MAGI, or the interest/dividends coming in throughout the year that will raise it.

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Step 1 to achieve FIRE: don’t go to law school.

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A2 Not going to lie, the initial comment made me laugh! I’m not as much into FIRE as some people here you guys are just smart with money so I thought I’d post it here - I genuinely enjoy the work that I do (or did at McKinsey) so I’m not hellbent on a path to retiring early. I do like being smart with my money though

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Good plan to reset your basis and avoid taxes. Niiice

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Sounds like a wash sale, wouldn’t work but good try.

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Either do that or a Roth conversion - bit definitely take advantage of the zero / low tax brackets!

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What is your role that M is paying for your tuition?

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OP, capital gains are available exempt from taxes upto I believe $100k for a couple. You should absolutely do tax gain harvesting. Check out mad fientist blog to understand the approach - he writes extensively about it.

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No. But should consider a Roth conversion if you can.

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Im confused. How is there no income tax on your gains? You wont have income from employer but wouldn't the gain be your income?

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Ah ok quick googling helped me. I guess also need to make sure your gains arent too mucto cross any thresholds. .

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If the investments are held in a Roth, you wont pay taxes on gains anyway. So this plan makes no sense to me. Also, if you have non-retirement assets, it will affect your financial aid. What am I missing? PS--ignore the haters re law school, but make sure you understand ROI and expected salary for the different career outcomes from your school.

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C1 it does count as I come but it’s not until my loan is forgiven (after first and second year back) that it hits

But a wash sale only applies if I’m selling at a loss, no? I’m talking about realizing all of my capital gains but I’d have no income so I would fall into the 0% tax bracket

Hmmm I guess you could in theory sell longer term gains up to $40k a year, but I’d suggest working with a CPA

Wash sale rule only applies to taking capital losses, not capital gains - so you’d be good to go and can purchase them right away again.

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