Save Capital Gains Tax
1.Hold Investments for Over a Year: Long-term capital gains (on assets held for more than one year) are taxed at lower rates than short-term gains (on assets held for one year or less). Long-term capital gains tax rates are 0%, 15%, or 20%, depending on your taxable income, while short-term gains are taxed at ordinary income tax rates.
2.Use Tax-Advantaged Accounts: Invest through retirement accounts such as 401(k)s, IRAs, Roth IRAs, or Health Savings Accounts (HSAs). These accounts offer tax deferral or tax-free growth, which can significantly reduce capital gains taxes.
3.Harvest Losses: Offset capital gains with capital losses through a strategy known as tax-loss harvesting. If your losses exceed your gains, you can deduct up to $3,000 ($1,500 if married filing separately) of the excess loss against other income.
4.Take Advantage of Exemptions: Some capital gains are exempt from taxes. For instance, if you sell your primary residence, you may exclude up to $250,000 of capital gains ($500,000 for married couples filing jointly) if you meet certain conditions.
5.Donate Appreciated Assets: Donate appreciated stocks or other assets to charity. You can avoid capital gains tax on the appreciation and may be able to deduct the fair market value of the donated asset from your taxable income.
6.Invest in Opportunity Zones: Investing in Qualified Opportunity Zones can defer capital gains tax on the invested amount and potentially reduce or eliminate taxes on the new investment’s future gains if held for a certain period.
