Most commonly applied to real estate investments, capital gains tax can also be assessed on any asset your business owns that you sell for more than the purchase price you paid. Capital gains tax is not assessed until the property or asset is sold. While you own it, the asset can increase in value at no extra cost to you.
That's why timing is so important when figuring your capital gains tax information. If you can time a large capital gain and offset it with a large capital loss, you can minimize your tax burden.
Consider the following capital gains tax information:
1. The IRS classifies capital gains tax into two different types: short-term or less than 1 year and long-term or more than one year.
2. Even stock that you liquidate must have been owned for a year or you will be responsible for paying a higher tax.
3. You may want to consider selling smaller assets and saving larger capital gains for a time when it's completely financially sound. This can be an inconvenience but can save you at the end of the year on your tax bill.
Figure your capital gains tax information
You have many different options in financial software when it comes to tracking your investments and subsequent capital gains. Some brokerages will let you download your investment information into your own personal software or they may track your costs for you for an extra fee and at your request.
Find capital gains tax calculators to help you with the math
For a quick look at your financial picture, many calculators exist online to help you crunch the numbers from figuring out the capital net gain to estimating your tax.
Work with a capital gains tax provider who can minimize the blow
A tax consultant can help in a strategy to limit your capital gains tax liability by timing purchasing and selling of certain assets. It's always best to avoid a large capital gain until you can even it out with a similar capital loss. To project your capital gains tax, list any assets you're considering liquidating and discuss the list with your advisor.
- You can always keep purchasing throughout the year to offset capital gains tax. Investing in stock is a good strategy that many small businesses utilize.
