Published on 7/13/2020
July 15 is notoriously vital for all taxpayers as the last date to file the taxes for the year 2019-20 without any penalty being levied.
Tax Day is equally essential for those persons who experienced capital gains in the year 2019. Capital gains are the profit money you get by selling an asset like property, precious metals, land, business, stocks, etc. The tax levied on the sale of assets depends on the amount of sale and the profit made.
Capital gains taxes for the year 2019 could be anywhere between 0% to a whopping 37% of the profit made. Hence, there is a need to save the tax money owed to the Government. The profit made could efficiently be utilized by you to secure your future financially and also prevent the IRS from reaching into your bank account and taking that hard-earned money away.
What to do in case of a Capital Gains Event?
For profits made between October 4, 2019, and December 31, 2019; you will have to pay the Government taxes on the capital gains event. Your best bid to avoid paying capital gains taxes is to reinvest the profit money before filing your taxes by July 15, 2020.
You can do this by identifying a qualified Opportunity Zone and investing the money in this fund- all before the July 15 deadline.
An Opportunity Zone is a low-income or economically distressed region and more than 8,700 such zones have been identified across the country. The Government supports private investment in these financially troubled regions through Opportunity Funds and giving capital gains tax incentives to the investors.
People investing their capital gains in Opportunity Funds qualify for a reduced capital gains tax. The tax can get reduced by up to 15% depending on the period you hold the investment for. If you manage to keep the investment for ten years, you will have to pay zero capital gains tax! That is, you will be permanently excluded from paying capital gains taxes in that scenario, and you can safely take your money out.
Thus, reinvesting the proceeds from a capital gains event is essential before the tax deadline to avoid hefty taxes that can easily be avoided by investing in an Opportunity Zone. If you fail to do this, be ready to whip out a significant chunk of money in economically uncertain times like these. Remember, California has the highest capital gains tax rate in the country.
Capital gains tax can be given a miss only if you act promptly and quickly. Reinvesting the profit will not only save all the tax money, but your money could also be put to good use if it sits there, waiting for you to cash it out after ten years when you owe absolutely no taxes to the Government. Get in touch with us at C19grants@mytaxfiler.com to know more about how you can avoid capital gains tax.