Question about capital gains tax on profits taken

Mrblobby
Regular
Posts: 69
Joined: Wed Aug 30, 2023 2:54 am
Location: Niigata

Re: Question about capital gains tax on profits taken

Post by Mrblobby »

cocacola wrote: Mon Jul 08, 2024 11:04 am Ack! My math was wrong, again.
Thank-you for stepping me through it. :)
coca-cola, this might be of interest.

My sale completed yesterday, so all of the numbers are now in place and settled.
I've spent a fair amount of time this morning trying to understand all the numbers and adjust all my own records.
All the individual calculations do work out, but oddly fitting them all into the bigger picture, adjusting various values, has been a challenge.
I must admit, I still find it all rather confusing.

I don't think I'm stupid, but I sure feel it with these things.

Anyway, time to forget about it all now and get on with other things.
Good luck!

:)
cocacola
Veteran
Posts: 143
Joined: Mon Oct 24, 2022 1:21 am

Re: Question about capital gains tax on profits taken

Post by cocacola »

Mrblobby wrote: Wed Jul 10, 2024 4:30 am coca-cola, this might be of interest.

My sale completed yesterday, so all of the numbers are now in place and settled.
I've spent a fair amount of time this morning trying to understand all the numbers and adjust all my own records.
All the individual calculations do work out, but oddly fitting them all into the bigger picture, adjusting various values, has been a challenge.
I must admit, I still find it all rather confusing.

I don't think I'm stupid, but I sure feel it with these things.

Anyway, time to forget about it all now and get on with other things.
Good luck!

:)
Hey, thanks for the update.

Yeah, I felt dumb going through the calculations in this thread, making those mistakes. But I think I am sorted now (hopefully). It's thanks to you for answering the question at first, and to those who helped us figure this out along the way. Hopefully, this will be useful to other members, as well.
Mrblobby
Regular
Posts: 69
Joined: Wed Aug 30, 2023 2:54 am
Location: Niigata

Re: Question about capital gains tax on profits taken

Post by Mrblobby »

I perhaps should add that I think the main reason for my continued confusion is/was that my holdings in the index was actually bought in 6 different chunks last year, each time at at different price. (I kept on adding to it). That probably complicates my understanding of the calculations on selling quite a bit. I can imagine it is much simpler to get a grasp of if you are only dealing with one original price.

:)
Butterball
Regular
Posts: 56
Joined: Thu Oct 26, 2017 12:29 pm

Re: Question about capital gains tax on profits taken

Post by Butterball »

It would be nice to have a page about this on the wiki, because the explanation is not that complicated; it just seems that way when people have different underlying assumptions about how it works.

If you just want to know how much capital gains tax you will pay when you sell some funds?
On Rakuten you'll see a screen like this (on the buy/sell page and the holdings listing page):

Image
時価評価額/評価損益 is your profit/loss. It's shown in yen by default; click on the % button to show as a percentage. In this case, the fund has gains (profit) of 23.37%.

Capital gains tax is 20.315% of gains. So if I sell some of this fund my net tax rate will be (23.37 x 0.20315) = 4.75%.
If I sell Y1,000,000 worth of this fund, I will pay about Y47,500 in tax and the rest, about Y952,500, will be deposited into my cash account.

Image

In this case the fund has appreciated a lot more and my net tax rate would be (187.1 x 0.20315) = 38.01% so I would be paying about Y380,100 and netting Y619,900 on a Y1,000,000 withdrawal.

That's how capital gains tax works. The 時価評価額/評価損益 value is all you need to figure out how much tax you'll be paying.*

Hopefully this didn't come off as smug or anything; I'm just trying to be straightforward. Nobody is born knowing how capital gains taxes work!
Obviously, someone please correct me if there's any error in this post!

* edit In case it's not clear what exactly 時価評価額/評価損益 indicates: This is simply the total amount you've paid into the fund (known as "cost basis"), compared to its current market value. That's assuming you haven't yet sold off any of the fund; there will be extra steps in calculating the cost basis if you have previously sold some shares, but hopefully you understand the principle.
TokyoWart
Veteran
Posts: 818
Joined: Tue Oct 02, 2018 8:39 am
Location: Tokyo

Re: Question about capital gains tax on profits taken

Post by TokyoWart »

On Rakuten you'll see a screen like this (on the buy/sell page and the holdings listing page):

Image
時価評価額/評価損益 is your profit/loss. It's shown in yen by default; click on the % button to show as a percentage. In this case, the fund has gains (profit) of 23.37%.

Capital gains tax is 20.315% of gains. So if I sell some of this fund my net tax rate will be (23.37 x 0.20315) = 4.75%.
If I sell Y1,000,000 worth of this fund, I will pay about Y47,500 in tax and the rest, about Y952,500, will be deposited into my cash account.
I think this is making the same mistake that was discussed above. The investment grew from 2,400,000 to 2,961,052 for a 561,052 yen gain. That is 561,052/2,400,000 = 23.37% gain but if you sell your tax rate is not (23.37 x 0.20315) = 4.75% of the amount sold, it will be (23.37/123.37)x(0.20315)x(amount sold). Consider what happens if you sell all 2,961,052. According to your calculation that would be (2,961,052) x .0475 = 140,650 in taxes. But we know that the total gain is 561,052 and 20.315% of that is 113,978 in taxes.

When an investment gains by some fraction X, you don't pay that fraction of the sales price times the tax rate, you pay X/(1+X) times the tax rate because the new investment total value is (1+X) x (original amount).
User avatar
adamu
Sensei
Posts: 2318
Joined: Wed Aug 02, 2017 11:43 pm
Location: Fukuoka
Contact:

Re: Question about capital gains tax on profits taken

Post by adamu »

Butterball wrote: Wed Jul 10, 2024 6:56 am It would be nice to have a page about this on the wiki
Please don't hesitate to request an account and create the article!
Butterball
Regular
Posts: 56
Joined: Thu Oct 26, 2017 12:29 pm

Re: Question about capital gains tax on profits taken

Post by Butterball »

TokyoWart wrote: Wed Jul 10, 2024 7:54 am
On Rakuten you'll see a screen like this (on the buy/sell page and the holdings listing page):

Image
時価評価額/評価損益 is your profit/loss. It's shown in yen by default; click on the % button to show as a percentage. In this case, the fund has gains (profit) of 23.37%.

Capital gains tax is 20.315% of gains. So if I sell some of this fund my net tax rate will be (23.37 x 0.20315) = 4.75%.
If I sell Y1,000,000 worth of this fund, I will pay about Y47,500 in tax and the rest, about Y952,500, will be deposited into my cash account.
I think this is making the same mistake that was discussed above. The investment grew from 2,400,000 to 2,961,052 for a 561,052 yen gain. That is 561,052/2,400,000 = 23.37% gain but if you sell your tax rate is not (23.37 x 0.20315) = 4.75% of the amount sold, it will be (23.37/123.37)x(0.20315)x(amount sold). Consider what happens if you sell all 2,961,052. According to your calculation that would be (2,961,052) x .0475 = 140,650 in taxes. But we know that the total gain is 561,052 and 20.315% of that is 113,978 in taxes.

When an investment gains by some fraction X, you don't pay that fraction of the sales price times the tax rate, you pay X/(1+X) times the tax rate because the new investment total value is (1+X) x (original amount).
Well, that’s certainly humbling! Thanks for the correction. I’m going to edit my post with the correct calculations just because I think the Rakuten screen shots might be helpful for someone.
adamu wrote: Wed Jul 10, 2024 8:25 am Please don't hesitate to request an account and create the article!
Yes, I hate to be the person who complains yet doesn’t try to help, but I think TokyoWart has shown why I’m reluctant to do so!
Post Reply