# ♻ Taking Out the Trash

**Published by:** [Let Them Eat Cake](https://paragraph.com/@ltecake/)
**Published on:** 2022-06-18
**URL:** https://paragraph.com/@ltecake/taking-out-the-trash

## Content

TL,DR: Every investment decision has tax implications. There’s no such thing as a free lunch. Whether it’s a pit, packaging, or scraps, consuming food products creates food waste. Financial products create a byproduct as well. Without careful planning, that byproduct can be investment penalties or a high tax bill. With planning, it can be a low tax bill, or even a rebate. Garbage / Capital Gains Tax Disposing of garbage is not free. Capital gains are not free either, however there are ways to reduce tax liability. Short term investments, which are held for less than 1 year, are taxed as normal income - meaning the highest earners could pay up to 37% percent in taxes*. Long term investments, held for 1 year or longer, are taxed more favorably, at 20%, or at the individuals income tax rate, whichever is lower. Recycling / Tax Deductions & Tax Loss Harvesting Returning bottles and cans at 5 cents a pop can really add up. So can tax deductions. With a capital loss, investors can lower their taxable income by up to $3,000 each year, and these losses carry forward. If you sold a stock for $15,000 less than you bought it for, you can take a $3,000 deduction every year for the next 5 years (15,000/3,000 = 5). Like a grocery store limiting the number of bottles you can return per trip, the IRS (internal revenue service in charge of collecting taxes) limits yearly losses. Taxable income is the amount of money you made in a year subject of federal, state, and local taxes. In the example above, your taxable income might be $50,000 /year. After the deduction, your taxable income has been reduced to $47,000. A 10% tax bill will be $4,700 instead of $5,700. $300 may not seem like a lot, but like a pile of 5 cent cans, these deductions can really add up. Tax loss harvesting involves selling stocks for a loss to balance out gains, and helps investors take advantage of the tax code. Compost / Charitable Rebates Like composting, charitable giving and charitable rebates benefits the planet and it’s inhabitants by putting excess too good use. Like a capital loss, charitable donations can be deducted from 25-100% of an individuals taxable income, and up to 25% of a corporations taxable income. The individual deduction only applies when you itemize your deductions - a process when filing taxes that involves specifying unique actions and situations that qualify for tax rebates. Let’s say your taxable income is $100,000 and your tax bracket demands a 30% tax rate. Instead of paying the government $30,000, you could donate up to $18,000 to a charity of your choice, and owe the government just $12,000.

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