Reducing Your Capital Gains Tax
Aside from paying income tax and payroll tax, individuals who buy and sell personal and investment assets should also deal with the capital gains tax system. Capital gain rates are usually as high as regular income taxes. The good news is there are ways to keep them as low as possible.
Here are handy tips to help you reduce your capital gains tax:
Wait one year before selling.
For capital gains to be qualified for long-term status (and less tax), wait a year before you sell the property. Depending on your tax rate, you may be able to save 10% to 20%. For instance, if you sell stock leading to a capital gain of $2,000, and you fall under the 28% income tax bracket and have held the stock for over 12 months, you are to pay 15% of $2,000, which is $300. If you’ve held the stock for hardly 12 month, you’ll pay $560 or 28% of $2,000 in taxes on the transaction.
Sell when you’re earning low income.
Your income level changes the amount of long-term capital gains tax you have to pay. Those within the 10% and 15% brackets need not even … Read the rest