Know These Tax-Cutting Investment Tips
You need to pay capital-gains taxes when you sell
investments that have risen (or "appreciated") in value (i.e.
real estate, stocks and bonds.) Here are some suggestions
to help you reduce your capital-gains taxes:
| |
|
|
| |
Know These Tax-Cutting Investment Tips 
|
Time to complete:
| Varies |
|
Money you'll spend:
| $0 |
|
What you'll get:
| Big tax savings |
List Of Capital-Gains Savers:
- When you sell your residence, you don't have to pay up to
$250,000 of capital gains taxes (rising to $500,000 for joint
returns.)
- Instead of selling stock, borrow money against it with a
margin loan from your stock broker. You'll get the
use of the money without having to pay taxes (but... you'll have to
pay interest on the loan.) There is no set payment for a margin
loan -- you can just let the interest grow if you need to. You
can borrow up to 50% of your stock portfolio's value, and up to 90% of the
value of your bonds.
- You can donate appreciated stock to charity. The
charity then avoids the capital-gains tax, while you take the
full stock value as a tax deduction. You might try a
DPGA (Deferred-Payment Gift Annuity), in which case you
will get payments later in life, in exchange for your deductible
gift to the charity. It's a good idea to ask your financial
planner about DPGAs.
- You can offset capital gains with capital losses. For
example, when you sell stocks for a gain, sell some of your
"loser" stocks for a loss, so you won't have to pay taxes on the gain.
Related idea: Do what's
called a "wash sale": you can sell a losing
stock for a loss, wait 30 days, then rebuy the stock. The loss
gives you a tax deduction, and you wind up with the same portfolio.
- When your heirs inherit your assets, they don't pay any
tax on capital-gains appreciation prior to the date of your
death.
- If you sell assets in a year when you are in the 15% tax
bracket, your capital-gains tax will be only 10% instead of
20%. Try to restructure your income to make some years
income-rich and other years income-poor, so that you'll sell
stock in a year when you're in the 15% tax bracket.
- Take advantage of the long-term capital-gains tax rate (20%
for assets held longer than one year.) The short-term
capital-gains tax is higher: if you're in the 28% tax bracket,
you'll pay 28% capital-gains tax.
- You can exchange real estate investments for other real
estate of equal value. Example: You want to own a ranch,
but you don't have enough money to pay for it. You do own a
few acres of farmland, but you don't want to pay capital-gains
taxes on its sale. If you can exchange the farmland for the
ranch, you can avoid the capital-gains tax.
Here's
another common technique: if you sell an investment property and
reinvest in another investment property within 180 days, you'll
pay no capital gains tax.
- You can defer capital-gains taxes with plans
like IRAs, 403(b), 401(k), 457, Keoghs, and SEPs. The capital gains
are taxed as ordinary income when taken out of the account.
Distributions cannot be made before age 59.5 without a penalty,
and must be made by age 70.5.
- If you bought shares in one company at two different times
in the past, always sell the stocks that were purchased at the
higher price, to minimize capital gains tax.
|
Sponsored Links
|
Further Reading:
|
|  |
|
|
|
Copyright (c) 1998-2007 Ark Royal Software.
Legal Notice, Disclaimer and Terms Of Use
|
