Capitalizing on Capital Gains Tax Breaks

December 8, 2021 1:00 pm (30 Minutes)

Discussion:

Jeff and Scott discuss how to reduce or avoid paying capital gains taxes. We use Satya Nadella’s recent sale of half his stake in Microsoft as an example. To reduce the capital gains tax burden, one can:

• Change the timing of capital gain income
  • sell before a new tax is imposed, or after an old tax is retired
  • wait to sell until capital gain becomes “long term,” currently after 1 year
  • wait to sell to take advantage of the power of deferral
  • Examples
    • https://www.journals.uchicago.edu/doi/abs/10.17310/ntj.2015.3.02
    • https://tax.unc.edu/index.php/news-media/should-you-sell-stock-before-president-biden-raises-the-capital-gains-tax-rate/
• Change jurisdictions
  • Move to Texas, Florida, Wyoming, etc.
• Hold until death to take advantage of the “step-up” in basis.
  • Inheritance, Estates and the Step-Up in Basis Rule – WSJ
• Donate appreciated assets to charity
  • Charity gets assets at their fair market value
  • Donor does not pay capital gains tax
  • Donor gets charitable contribution deduction if itemizes on personal tax return
• Tax loss harvesting
  • Sell assets that have losses to offset assets that have gains.
• Invest in Opportunity zones