Setting a Tax Strategy

From the Tax Strategy page, you can control which method the application uses to match closing transactions. Once you choose your method, Gain/Loss & Tax Center will automatically update and close your positions based on that setting.

Setting a Tax Strategy

When Scottrade reports your cost basis information for covered positions to the IRS each year, the tax strategy used can potentially have a significant impact on the taxes you owe. That's why Scottrade allows you to choose your tax strategy, either by selecting a default tax strategy or by changing your strategy on a trade-by-trade basis.

For details about the seven available calculation methods and when each can be used, visit Tax Strategies.

Default Tax Strategy

To select the default tax strategy you would like to use for all your orders, hover over My Account in your account and click Gain/Loss & Tax Center under the Tax Information heading.

Click the Tax Strategy tab along the top of the Gain/Loss & Tax Center. Using the Sell Method drop-down box, select the tax strategy, also known as the lot relief method, you would like to use. Then, select the security type to which you’d like to apply your selected method. Note that Average Cost can only be used for mutual funds.

Click Go to save your strategy selection. You will see previous strategies you selected and the dates during which they were in effect in the Current Strategies section at the bottom of the page.

Trade-Specific Tax Strategy

If you'd like to select a tax strategy for a particular trade that is different than the default tax strategy you've chosen, you can do so in the Gain/Loss & Tax Center.

Hover over the Activity tab at the top, and left-click on Raw Trades. You can locate a particular sale (or other closing transaction such as Cover Short) by using the search tool at the top to find a particular symbol, or simply find the trade in the Raw Trades table provided. Sorting the activity by clicking the Date column heading can also be useful.

When you've located the closing transaction, mouse over the orange arrow to the right of the transaction information and click the Details link. You'll see further trade details come up, along with a drop-down box specifying your Current Sell Method. Note that the Current Sell Method drop-down will only appear on unsettled trades for which you are able to specify a tax strategy. You can choose from any of the available strategies, including Versus Purchase. VsPurchase is a means of matching a particular tax lot (generally a purchase) against your closing transaction (generally a sale).

If you select VsPurchase, you'll see all of your available lots for that security. To select the shares of each lot to be applied to your current trade, enter the number of shares you would like to designate into the Quantity to Apply (Qty to Apply) field to the right of the lot in question. The tool will calculate the Cost to Apply from each of the lots you choose.

When you're finished, click Save.

Your tax strategy can only be changed from the day following the trade execution up to and including the settlement date. After the settlement date, you cannot make any changes to the calculation method used for that particular trade. If you don't make a selection, Scottrade will use the global tax strategy you have chosen. If you have not changed your global tax strategy, Scottrade will use the default election FIFO (first in, first out) to calculate your gains and losses.

For more information about the cost basis information Scottrade is required to report to the IRS, visit the Cost Basis FAQ.