What is a T+1 Settlement Date and How Will it Impact My Investment?

May 16, 2024 09:37 AM MST

What is a T+1 Settlement Date?

The day you buy or sell a security is the trade or transaction date. The settlement date is the official day that shares are transferred to a buyer’s account or money is transferred to a seller’s account. Since 2017, the time period between the transaction date and settlement date has been two business days or T+2. As of May 28, 2024, the SEC will shorten the settlement date to one business day or T+1. So if you sell shares on Tuesday, your settlement date in your account is Wednesday. With trades now settling faster than ever before, Netbasis is an important tax planning tool that quickly and accurately creates strategic tax planning scenarios.

Which Securities Will Be Affected by the New T+1 Settlement Date?

Stocks, bonds, exchange-traded funds (ETFs), certain mutual funds, municipal securities, Real Estate Investment Trusts (REITs), and master-limited partnerships (MLPs) traded on U.S. exchanges. Government Bonds already utilize the T+1 Settlement Date.
Note: Mexico and Canada will also be moving to a T+1 Settlement Date on May 27, 2024.

Are There Any Potential Tax Implications With the New Settlement Date?

Yes, there can be tax implications with the T+1 Settlement Date and it is important for traders and investors to take control of their entire investment journey. With only half of the amount of time that investors had for the last seven years, effective sales planning is key. Once the settlement has completed, all decisions are locked in and can greatly impact an investor’s tax responsibility. The adjusted cost basis, commissions or fees paid, wash sale calculations, tax lot accounting methods, sales lot selection and tax lot harvesting can impact the amount of losses and gains and the decisions have to be made faster than ever.

By embracing innovative tax planning tools and methodologies, individuals can immediately unlock the potential for significant tax savings. Netbasis is a comprehensive tax strategy application designed to empower traders and investors to quickly optimize tax outcomes. Users can evaluate sale vs. purchase choices, and actually see the potential tax implications of a sales planning strategy, using methods like the Net Zero sale method to achieve optimal tax efficiency.

In essence, the key to success in navigating the T+1 Settlement Date post-May 28th lies in proactive planning and using tools like Netbasis. In order to unlock the potential for significant tax savings and pave the way for financial success in the era of T+1 trading.