Capital Investment Tax Agency

Keep more money that’s working for you

If you’re an investor, we’re willing to bet there are some surefire ways to legally reduce, defer, or, in some cases, eliminate costly taxes on your investment gains that you didn’t even know were possible. After all, Uncle Sam would rather keep this a secret, but we’ll fill you in!

Consider buy-and-hold investing

In the United States, investors are only taxed on capital gains (when investments are sold), so in some cases, it makes more sense to hold your assets to avoid capital gains taxes.

This is especially beneficial because if you intend to hold long-term, that will impact which kinds of investments you intend to make. Besides, you can hold most investments indefinitely and keep deferring on tax gains, situation pending.

Think about lower long-term capital gains rates

Long-term capital gains tend to yield lower tax rates than short-term, so depending on your investment strategy, it may very well be worth considering long-term investments.

Look into asset location

You’ll typically be taxed on the dividends and cash distributions in the year you get them, which can restrict the possibility of reducing taxes. But, really, it will boil down to where your assets are held because certain strategies (such as an IRA) can allow you to hold off on paying capital gains taxes. About IRAs…

Open an IRA

There are two options to go with, traditional IRAs, which allow investors to put away money on a pre-tax basis (which can reduce your taxes with the right strategy) while having the option to defer taxes on profits.

Or Roth IRAs are the opposite, where you put away money on an after-tax basis. This is particularly popular for retirement accounts because once you’re 59 ½ (we don’t know why they didn’t just go with 59 or 60), you can contribute to your Roth IRA tax-free without having to pay taxes on making withdrawals.

Use a 1031 exchange

It is ideal for those looking to flip or sell a long-term property because they can do so while deferring their capital gains. The only catch? You’ll just have to invest proceeds in another investment property.

But watch out! Some 1031 exchange rules can be confusing, so it’s best to consult a professional to ensure you’re following the rules and receiving the aforementioned benefits.

Leverage tax-loss harvesting

This is when the IRS lets you write off realized investment losses against your gains, meaning you will only owe tax on your net (not gross) capital gains. This can be particularly useful for risky investments in a shaky economy.

Putting plans into action

While all of these strategies have their share of differences, they also have one core similarity – they have complicated rules that can get you into trouble if broken. That’s why it’s so important to work with people who will help you avoid these pitfalls and put your financial success first.

Regardless of who you decide to work with, be sure you have a professional look over your decisions before making them official. KDA’s seasoned tax strategists would be more than happy to help you!

Our Services

Our long line of award-winning services shows we put our clients’ goals above all else. We are committed to helping you be the best you can be before, during, and after tax season.

About KDA

We’re a nationally-recognized, award-winning tax, accounting and small business services agency. Despite our size, our family-owned culture still adds the personal touch you’d come to expect.