Capital Gains Tax Strategies
There is always a reason behind the concept of buying low and selling high: Capital Gains Tax. Many sellers who put their properties or businesses up for sale is looking for new strategies to help them cut off payments for capital gains taxes. In today’s recession, business owners can only hope to avoid more losses and have everything to gain. By knowing capital gains tax strategies, you will be able to save yourself from unnecessary costs which you can pocket instead.
Capital gains are results of selling your capital assets
These can be real estate, building, commodities, stocks, bonds, and many more. Your capital gains will depend on the length of time that you own the asset, before releasing it for sale. What’s good is that not only the way you can control the timing of your capital gains, but you can avail of taxes at special reduced rates. Your capital gain is computed by the difference between the sale price and the purchase price. Short-terms capital gains tax will be the same rate as that of your income. If you wish to have special rates, long-term capital gains tax is the best for you.
Eight Capital Gains Tax Strategies You Need to Know:
1. Check your tax installments and base them on the estimated tax of the current year. You may be eligible to qualify for quarterly tax payments, instead of doing it monthly, and saving you more.
2. When you sell your assets, instead of paying taxes in a single payment, you can opt for tax installments, until you’re done paying what you owe. This is to protect your cash reserves.
3. Before choosing the capital gains tax strategy of making deferred payments, see if you will have resources to cover the payment, specially for long-term.
4. File your capital loss and business tax return early. This will make you get your tax refund and claims faster. You can file as much as $3,000 a year. Remember, always use your capital loss for your advantage.
5. Always check your paperworks and see if you have refunds on sales tax and any other payments made to you by mistake. If you own a business, you may review your business operations to see if you have overlooked a possible refund that can help you save more.
6. If you own a Canadian Controlled Private Corporation, you can pay any amount to your shareholders, tax-free. All you need to do is file the right documents with the Canada Revenue Agency.
7. You can swap your stocks to better ones and declare a capital loss. This capital gains tax strategy can offset the amount of your capital gains, shielding you from inflation that may happen in a wash sale for 31 days.
8. If you choose short sales for your capital gains tax, you can postpone by purchasing identical assets at a low price. If the value becomes worthless, you will gain when the short sale is closed.
According to the IRS, almost everything you own and use for business or pleasure is considered a Capital Asset. Selling these assets can make you experience capital loss and capital gain. The term of your capital gains and losses will depend on how long you own the assets. Long term will mean over a year, and short term for less. As a rule of thumb, your capital gains should be greater than your capital loss. For these reasons, capital gains tax strategies should be carefully planned. There are many tax professionals who can help you have a reduced capital gains tax. What is important is reporting both capital gains and losses. You may check with the IRS for downloadable forms.
forms by simply visiting their website, or calling their toll-free hotline: 1-800-TAX FORM or 1-800-829-3676. Keep in mind that in any business, every dollar counts.
RESOURCES:
Woolford, Paul. “ Tax Strategies Entrepreneurs Often Overlook. “ May 2009.
http://www.financialpost.com/story.html?id=1607299
Prudential Financial Inc. “ Tax Strategies: Capital Gains and Losses. “ 2009.
http://www.prudential.com/view/page/12621?param=12624
IRS.Gov. “ Tax Facts About Capital Gains and Losses. “ February 2009.
http://www.irs.gov/newsroom/article/0,,id=106799,00.html
Additional Reading:
Silverman, Rachel Emma. “ Deconstructing a New Capital-Gains Strategy. “ March 2007.
The Wall Street Journal ( 2009 ). http://online.wsj.com/article/SB117443695947743522.html
