Capital Gains Tax Strategies: Keep More When You Sell
Selling a business, property, or investments? Don't let capital gains tax take 20-40% of your profits.
Know what you're dealing with
Understanding Capital Gains Tax
| Tax Type | Rate | When It Applies |
|---|---|---|
| Short-Term Capital Gains | 10-37% | Assets held less than 1 year |
| Long-Term Capital Gains | 0%, 15%, or 20% | Assets held more than 1 year |
| Net Investment Income Tax | 3.8% | Income above $200K/$250K thresholds |
| Depreciation Recapture | 25% | Gain attributable to prior depreciation |
| State Capital Gains | 0-13.3% | Varies by state (CA highest) |
⚠️ The Real Cost: A California Example
Selling $5M in appreciated assets in California:
- Federal long-term gains: 20% = $1,000,000
- Net Investment Income Tax: 3.8% = $190,000
- California state tax: 13.3% = $665,000
- Total tax: $1,855,000 (37.1%)
Potentially exclude $10M+ in gains
Strategy 1: Qualified Small Business Stock (QSBS)
QSBS Requirements
- ✓ C-Corporation stock
- ✓ Acquired at original issuance
- ✓ Held for 5+ years
- ✓ Company gross assets under $50M
- ✓ Active business (not services, finance, etc.)
QSBS Benefit
- Exclude greater of:
- • $10 million, OR
- • 10x your basis in the stock
- Example: $500K investment becomes $15M = $10M excluded, $5M taxed
Defer, reduce, and potentially eliminate
Strategy 2: Opportunity Zones
Best for: Real estate investors and business sellers with large gains who want long-term real estate exposure.
Spread gains over time
Strategy 3: Installment Sales
Standard Installment Sale
- • Seller financing over multiple years
- • Tax paid as payments received
- • Can keep you in lower tax brackets
- • Interest income on deferred amount
- • Risk: buyer default
Structured Installment Sale (SIS)
- • Third-party intermediary
- • Investment-grade backing
- • Removes buyer default risk
- • Flexible payment schedules
- • Can defer gains 20-30 years
Additional tools in your toolkit
More Capital Gains Strategies
1031 Exchange
Swap investment real estate tax-free. Must identify replacement property within 45 days, close within 180 days. Unlimited deferrals.
Charitable Remainder Trust
Contribute appreciated assets, receive income stream, charity gets remainder. Avoid capital gains on contribution.
Tax Loss Harvesting
Sell losing investments to offset gains. Net losses up to $3,000/year against ordinary income. Carry forward unlimited.
Gift to Lower-Bracket Family
Gift appreciated assets to family in 0% capital gains bracket. They sell and pay no federal tax. Watch for kiddie tax rules.
Stepped-Up Basis at Death
Assets passed at death get basis 'stepped up' to fair market value. Heirs can sell immediately with no capital gains.
Delaware Statutory Trust
1031 exchange into fractional ownership of institutional real estate. Passive income, professional management, eventual exit.
What to do with the after-tax proceeds
Section 7702: The Post-Sale Strategy
After selling and paying capital gains, where do you put the proceeds? Section 7702 converts those after-tax dollars into tax-free retirement income.
No Contribution Limits
Fund your entire sale proceeds (after tax) into tax-free growth.
Tax-Free Growth
No capital gains on the growth. No dividends taxed. Pure accumulation.
Tax-Free Access
Access via policy loans. No taxable events. No early withdrawal penalties.
Frequently Asked Questions
Facing a Capital Gains Event?
Don't let 37%+ of your profits go to taxes. Let's analyze your situation and find the optimal strategy.