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Three capital gains tax questions to ask yourself

Fall is here, which means it’s time to start thinking about year-end tax consequences, including capital gains taxes. Of course, you would never want to buy or sell investments based on tax outcomes alone, but it’s still a good idea to understand the tax consequences that you stand to face and plan accordingly.

It would be a great idea to meet with a tax adviser before the end of the year in order to get a strategy in place for selling stocks and collecting gains. Capital gains are a complicated area of tax law, which is why you will want to meet with a professional for personalized advice. In the meantime, here are some things to think about:

What are capital gains taxes?

Capital gains tax is applied to the profits realized on the sale of a non-inventory asset that was purchased at an amount that was lower than the amount the asset was sold for. The tax most commonly applies to the sale of stocks, bonds, precious metals and property. A different tax rate applies depending on whether the assets have been held for over one year before being sold.

Could you end up paying zero capital gains taxes this year?

If you sell or sold assets that you held for more than a year and you will make less than $37,450 in taxable income and are filing single (or less than $74,900 if fining jointly), then you may not be on the hook for any capital gains taxes. Considering that the maximum rate for capital gains tax is 20 percent, this is a major benefit.

Did you have capital losses as well as capital gains?

Many people have long-term capital losses and gains within the same year. It’s important to look at your overall losses and gains because you are taxed on the “net gain,” meaning you can deduct your losses from your gains. Some people choose to sell off assets at a loss in order to offset their gains. However, there are certain rules that apply here, so it’s important to only do this with the help of a financial adviser.

All of these issues and more were discussed in a recent article from The Huffington Post. Check it out here for even more capital gains tax issues to consider before the year’s end. 

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