For those who tax loss harvested / invested at the bottom in 2020, today the gains are probably nearing 100%, so $10k originally invested would have $1.5k long-term capital gains tax netting $18.5k. If instead one borrowed that amount, it would take about 3 months to accrue that much interest at 32%. And if one was making roughly the same amount of monthly payments to the loan so the average duration was still 3 months, that means someone could borrow $18.5k at 32% paying back $3.4k/mo over 6 months and still be less than what would have been owed in capital gains tax.
Just very broadly splitting up loan types to approximate rates (and assuming 0% origination fees) then calculating months to break even in terms of interest vs tax on 100% gains:
- 32% cash advance - 6 months
- 16% credit card - 12 months
- 8% personal/student loan - 24 months
- 4% auto loan / HELOC - 49 months (4 years, 1 month)
- 2% mortgage - 97 months (8 years, 1 months)
- 1% margin loan - 195 months (16 years, 3 months)
Many people here probably have access to more reasonable rates around say 4% or better, so it seems like if one has even modest 14% long term capital gains, it's cheaper to borrow money than paying taxes if one can pay it back within a year?
Edit: More generally, this calculation works even when future tax rate isn't 0%, e.g., dropping from 20% to 15% capital gains tax rates (roughly divide the above months for 15% by 3), not needing to pay 3.8% net investment income tax, moving states for more favorable rates. Even if the tax rate is the same, there is benefit in deferring to keep what-would-have-been-taxed invested.