A few small changes in your investing strategy can result in big tax advantages
By Jeff Reeves – Kiplinger Personal Finance
Investing profitably is no easy feat. And for those lucky enough to avoid the pitfalls of Wall Street and who can turn a tidy profit, nothing is more frustrating than seeing those hard-won returns get scaled back due to the “capital gains” taxes levied against them.
Folks may be wondering how to avoid capital gains taxes altogether. The short answer is that you likely can’t. Indeed, the vast majority of retail investors are unable to sidestep the tax man completely.
However, with a few subtle but important changes to your investing strategy, you may be able to reap significant tax deductions. Put another way, you could walk away with bigger profits than anticipated as the money stays in your pocket instead of going into Uncle Sam’s coffers.
How much will I pay in capital gains taxes?
If you’re wondering what investments qualify for capital gains taxes, the answer is quite simple.
According to current Internal Revenue Services (IRS) policies, “(a)lmost everything you own and use for personal or investment purposes is a capital asset.” That includes stocks, bonds and exchange-traded funds (ETFs), but also other non-traditional investment assets including physical real estate properties or even cryptocurrencies like bitcoin.
But while a broad array of investments qualify for capital gains taxes on their returns, the rate at which you are taxed depends on two main categories: The amount of time you have owned the underlying investment and your taxable income bracket.