In this episode we're going to go over how if you had a capital
gain, you can reduce the tax impact from that.
So first off, a capital gain is if you bought something for a lower
price and you sold it for a higher price, that difference,
that increase in value, that appreciation while you owned it,
when you sell it, that triggers a capital gain.
So in this example, in this episode where I'm going to go over and
refer back to an example where we, we play with some numbers at about
a 300. $300,000 capital gain. So if you have a $300,000 capital
gain, it could have come from selling stocks.
Like if you bought stock for a hundred thousand dollars and sold it for
$400,000, that's a $300,000 capital gain.
If you bought a home for a hundred thousand and sold it for $400,000,
that could be a capital gain. Like if it was a rental home,
if you bought cryptocurrency or Bitcoin or really anything else,
if you bought up for $100,000 and you sell it,
sell it for $400,000, that's a $300,000 capital gain.
And please note, it does not need to be $100,000 and $400,000.
The sale, the purchase price and sales price doesn't matter as long as cap,
as long as we're looking at the capital gain specifically.
So you could have bought it for a million dollars and sold it for
$1.3 million. That's a $300,000 capital gain.
So really, we're just looking at the difference between the purchase price and the
sales price. So first off, that's the capital gain.
So if you are selling a business and this is,
as part of the year in tax planning, that is a lot of the
questions that we get. Like people have a capital gain,
and now they're worried about what to do with it. They're worried about paying
tax on it, and they want some strategies.
They want some options to potentially reduce that capital gain,
or at least reduce the impact, the tax impact from that capital gain.
So that's what I'm doing today. I've got four things that you can do
to reduce that. So number
one, and these are not in order of importance, I'm just listing four things
out for you today, but number one is opportunity zones.
So an opportunity zone, it's, it's an area in the United States that's been
designated by, it was the governors and the federal government that came together and
came up with these specific areas on the map.
And in these cities, these specific areas that qualify as a,
as a. They're in a qualified opportunity zone.
So if you invest in an area that's in an opportunity zone,
then you get some special tax treatment. So there's two ways to do it
in these opportunity zones. You can do it directly through a fund.
And this fund would be where people have raised other people's money and they're
investing for you in these areas.
They're usually going to go buy like an apartment building or do some sort
of development in these areas. And the other way is for you to do
it directly. So I'd go to the map.
If you do a Google search for opportunity, opportunity zone map,
you'll find it. The government site sometimes is a little glitchy,
but there's these other sites that have it as well. But what happens to
your money. So remember the example, if you have $300,000 gain,
if you invest $300,000 into an opportunity zone or an opportunity
zone fund, that $300,000 will not be taxed.
In the current tax year, the rules get pretty complex.
I'll do a later video and I have done prior videos on opportunity zones.
But as long as you understand in that tax year, you are not taxed
on that $300,000. There's a specific way to report.
But it'll essentially reduce your taxable income by that amount.
Your capital gain will be reduced by however much you put into an opportunity
zone. And it doesn't have to be the full $300,000.
You could do $100,000. You could do a partial,
gain exclusion if you want. But just know when it goes into the opportunity
zone fund, you've got to do it within six months from when you realized
that capital gain, you've got six months to put the money in.
It kind of sounds like a 1031 exchange. Right?
But it's not. It's a little different. You can actually have control
and access to those funds for the six months. It just needs to be
in the opportunity zone, the opportunity zone fund by the end of the six
months. So that's number one. One of the four ways to reduce the tax
impact from a capital gain. So number two is buying real estate.
So a lot of the videos I've done and a lot of my own
investing has been buying real estate and accelerating the depreciation.
This is through cost segregations,
the accelerated depreciation, the bonus depreciation.
If you have a capital gain, remember $300,000 of capital gain.
On one side, you can have other investments.
That reduce your taxable income and that negative taxable income can
actually reduce the tax impact from your capital gains.
So you can have different sources of income or losses and they can offset
each other. The laws,
they, they do get pretty complex. There are some limitations.
There are specific types of investments that might not be able to offset other
types of investments. But in the, the Wealth Game Alliance and the wealthgame.io and
the free basics course, I talk more about the past.
So make sure to go to the wealthgame.io and at a
minimum, sign up for the wealthgame basics course, which is just completely free.
But we want to make sure you're doing this right. I want to get
as much as you can. I want to make sure people are doing it
right and implementing this and actually saving the taxes.
So so we've talked about number one was opportunity zones.
Two was buying real estate and accelerating the depreciation.
Number three is hard. Harvesting your capital losses.
So remember on one hand, you've got a $300,000 capital gain for the tax
year. But if you are holding,
if you're holding assets like stock or say you're holding crypto at a
loss. Like say you bought something for $100,000 and now it's
worth $50,000 and you still own it.
You've not realized that loss yet. And it's an,
it's an unrealized loss. And it's just sitting there is not benefiting.
And you for taxes yet until you sell it.
But if you go through, whether you have a finance advisor or you're looking
at it yourself, go through and look at what current loss positions you have,
what unrealized losses you have because you can harvest.
That's what they call it. You can harvest these losses and those losses can
offset the capital gains from the,
remember, the $300,000 capital gain. You can use those losses.
If it's a $50,000 loss, you can use that loss and it can offset
the tax impact. From the $300,000 gain,
effectively making you only pay tax on a $250,000 gain.
You'd be using the capital loss to offset a capital gain and
you can absolutely do that. So that's. That's number three was harvesting capital losses.
Number four is just accelerating expenses.
This is mostly, this is if you're a business owner,
but if you have expenses, you're going to pay for next year.
And if this year is a really high tax year,
that's usually with as part of the tax planning strategy that we like to
do, I like to accelerate expenses into those high tax or the high
income years. So you'd be prepaying maybe.
If you're prepaying for software or tools or equipment or vehicles,
you're buying things that you need anyways, but you're bringing it into the current
tax year. You might be buying it a month early, six months early,
maybe even a year early, but instead of being those higher tax prices.
You're bringing those deductions into the current tax year to offset the tax impact
from your like your one off $300,000 gain that got your income really high
in just one year. So those are the four recommendations I have for offsetting
or. We're reducing the impact, reducing the pain from paying tax on the $300,000
capital gain. We had opportunity zones,
remember? And we had buying real estate and accelerating the depreciation.
We had harvesting those capital.
Losses and that last one was accelerating your deductions.
So those are the four things I'd recommend at least considering if you don't
want to have as much of a tax bite or a tax hit from
a capital gain in one year. So go to to just get more information.
Unless and see how the flow of things are and to get more of
these ideas go to the www.wealthgame.io.
Get on to the course. Join us in Wealth Game Alliance.
If you want some specific questions answered, I'm answering all the questions in the
Wealth Game Alliance. We'd love to have you there. But,
thank you for listening and I'll talk to you all later.