If you are an investor, you know that capital gains taxes can take a big bite out of your profits. But what if you could avoid paying them altogether? Sounds too good to be true, right? Well, it's not. There are legal ways to pay 0% in capital gains taxes, and in this article, we will show you how.
What are capital gains taxes?
Capital gains taxes are taxes that you pay when you sell an asset for more than you bought it. For example, if you buy a stock for $100 and sell it for $150, you have a $50 capital gain, and you have to pay taxes on that amount.
The amount of taxes you pay depends on how long you held the asset and your income level. If you held the asset for more than a year, it is considered a long-term capital gain, and it is taxed at a lower rate than your ordinary income. If you held the asset for less than a year, it is considered a short-term capital gain, and it is taxed at the same rate as your ordinary income.
The long-term capital gains tax rates for 2021 are:
- 0% for single filers with taxable income up to $40,400, married filing jointly with taxable income up to $80,800, or head of household with taxable income up to $54,100.
- 15% for single filers with taxable income between $40,401 and $445,850, married filing jointly with taxable income between $80,801 and $501,600, or head of household with taxable income between $54,101 and $473,750.
- 20% for single filers with taxable income over $445,850, married filing jointly with taxable income over $501,600, or head of household with taxable income over $473,750.
The short-term capital gains tax rates are the same as your ordinary income tax rates, which range from 10% to 37%, depending on your income level and filing status.
How to pay 0% in capital gains taxes?
As you can see, the long-term capital gains tax rate is much lower than the short-term capital gains tax rate. Therefore, one of the simplest ways to pay less in capital gains taxes is to hold your assets for more than a year before selling them.
But what if you want to pay 0% in capital gains taxes? Is that possible? Yes, it is. Here are some strategies that can help you achieve that goal:
- Sell your assets when your income is low. If your taxable income falls below the threshold for the 0% long-term capital gains tax rate, you can sell your assets without paying any taxes on your profits. For example, if you are single and your taxable income is $30,000 in 2021, you can sell up to $10,400 worth of long-term capital gains without paying any taxes on them. This strategy works well if you have a year when your income is unusually low due to job loss, retirement, or other reasons.
- Invest in qualified opportunity zones. Qualified opportunity zones are economically distressed areas that offer tax incentives for investors who invest in them. If you invest in a qualified opportunity fund (QOF), which is a fund that invests at least 90% of its assets in qualified opportunity zones, you can defer paying taxes on your capital gains until December 31, 2026. Moreover, if you hold your QOF investment for at least five years, you can reduce your taxable capital gains by 10%. If you hold it for at least seven years, you can reduce it by another 5%. And if you hold it for at least 10 years, you can exclude any additional gains from taxation altogether.
What are opportunity zones?
Opportunity zones are designated areas in the United States that have been identified as having low-income and high-poverty levels. The goal of creating opportunity zones is to encourage economic development and job creation in these areas by offering tax benefits to investors who invest in them.
There are over 8,700 opportunity zones across all 50 states and the District of Columbia. You can find a map and a list of opportunity zones on the IRS website: https://www.irs.gov/pub/irs-utl/oz.pdf
To invest in an opportunity zone, you need to create or invest in a QOF within 180 days of selling your asset that generated the capital gain. A QOF can be any type of entity that meets certain requirements. You can find more information about QOFs on the IRS website: https://www.irs.gov/newsroom/opportunity-zones-frequently-asked-questions
Investing in opportunity zones can be a great way to defer and reduce your capital gains taxes while also supporting communities in need. However, there are also some risks and challenges involved, such as finding a suitable QOF, complying with the rules and regulations, and monitoring the performance and impact of your investment. That's why you should consult Akkish Inc before making any decisions.
Why should you consult Akkish Inc?
Akkish Inc is a leading financial consulting company that specializes in helping investors optimize their tax situation and maximize their wealth. We have a team of experts who can analyze your financial goals and recommend the best strategies for your specific situation. We can also help you implement these strategies and monitor your progress.
If you want to learn more about how to pay 0% in capital gains taxes, book a FREE consultation with us today and receive a $5 gift. Just visit our website at https://www.akkish.com and fill out the form. We will get in touch with you as soon as possible and help you achieve your financial dreams.
Keywords: capital gains taxes, 0%, legal, strategies, opportunity zones, Akkish Inc, financial consulting
Tags: finance, investing, taxes, opportunity zones, charity