If you’re trying to decide how to increase your capital gains, consider offsetting to avoid paying taxes on these gains. Offsetting is possibly the most important method employed to mitigate cap gains taxes.
It should be first noted that offsetting is a lawful measure to avoid tax consequences. Tax evasion, on the other hand, involves deception at its core, is illegal and can bear serious penalties.
To begin to understand offsetting, basic knowledge of the tax code is also required. Many novices don’t realize that capital gains taxes must be paid on net capital gains, not gross. Looking at the totality of your gains is in order, not just the one gain standing alone. If you earn $5000 in cap gains on one investment but lose $4000 on three others, then your net capital gains for tax purposes is $1000, not $5000. Looking at your portfolio in totality is advisable to help offset your gains liability, is legal and is a method employed by all tax professionals.
You can also offset the cap gains on the sale of real estate by reinvesting in like kind real estate. The turnaround time to do so is limited, so it is advisable to have a reinvestment property in waiting as you line up the sale of your property. The current tax code allows for 45 days between sale and purchase of a new property. You have a full 180 days to close on the new property, so time is of the essence to realize this tax benefit.
Regardless of your method and investment type, be vigilant and diligent with your investments and explore all options for offsetting your capital gains. Employ a professional if you’re unsure and always use sound judgment and most importantly, work hard to protect the capital gains earned as a result of your hard work.