Charles Schwab Cost Basis Method transaction tax optimization

You need to select TaxLotOptimizer in Service-> AccountSetting->CostbasisMethod. By default, it will sell the losing one first, then the longterm gain, and then the shortterm gain. If you have special needs, you can manually specify the lot.

This means a specific strategy for setting up accounts on financial services or investment management platforms. Specifically, select "Tax Lot Optimizer" in "Services" > "Account Settings" > "Cost Basis Methods." This setting automatically determines which investment shares to sell (i.e., "share batches") based on certain priorities, optimizing tax benefits. Here is a detailed explanation of this setup:

Tax Lot Optimizer: This is an automated strategy for selecting the most advantageous share batches when selling securities, aiming to minimize tax burdens.

Sell losing shares first: First, the system will prioritize selling shares whose current value is lower than the purchase price (i.e., shares in a loss-making state). This approach allows capital losses to offset other capital gains, thereby reducing taxable income.

Then comes long-term gains: if there are no shares left in the loss or the losses are insufficient to meet the selling demand, the system will then sell those shares held for more than a year (i.e., long-term capital gains). Under U.S. tax law, long-term capital gains are typically taxed at lower rates.

Finally, short-term gains: if more shares need to be sold, the system will sell those held for less than a year (i.e., short-term capital gains). Short-term capital gains are usually taxed at the ordinary income tax rate, which is relatively high.

If you have special requirements, then manually specify shares: If you have special needs, such as wanting to keep certain shares or sell according to your own plan, you can manually specify the specific batch of shares to sell, rather than relying on the system's automatic optimization strategy.

In this way, you can manage your portfolio more effectively and achieve optimal tax results. Of course, the specific tax implications also depend on the tax laws of your country or region, so it's best to consult a professional tax advisor before making a decision.