Updates to Capital Gains Rules
Friday, February 1st, 2019  
         Taxes on capital gains (gains from the sale of property or investments) are hard to get around. While ordinary gains can be offset by business deductions, there are relatively few ways to avoid paying taxes on capital gains. In this newsletter, we will discuss strategies available to avoid, defer, or reduce capital gains taxes after the Tax Cuts and Jobs Act.
         Strategies to Avoid Capital Gains Tax
  • Offsetting losses: no capital gains tax is assessed if all capital gains can be offset by capital losses in the same year.
  • Exclusion on sale of personal residence: for taxpayers who have owned and lived in their home for 2 out of the last 5 years, up to $500,000 of the gain on the sale of the home ($250,000 if not married filing jointly) can be excluded. 
  • Gifts or inheritances: when appreciated assets are gifted, the giver does not have to pay capital gains tax. Keep in mind, however, that any gifted assets will have the same cost basis as they had in your hands. If the same assets are transferred via an inheritance, the inheritor's basis will be the fair market value at the time of death, which is much more favorable for the receiver. 
  • Gift of appreciated stock: to avoid paying capital gains taxes on appreciated stock held for more than a year, consider donating the stock to a charity. You will receive a deduction at the fair market value of the stock and will not have to pay capital gains tax.
         Strategies to Defer Capital Gains Tax
  • 1031 exchanges: the transactions can be complex, but 1031 exchanges essentially allow investors to sell property and reinvest the proceeds in a new property (or properties) while deferring capital gains taxes until the new property is sold. If the new property is subsequently exchanged in another 1031 exchange transaction, capital gains could be deferred perpetually. 
    Note: the Tax Cuts and Jobs Act restricted the applicability of 1031 exchanges to only include real estate transactions. Automobile trade-ins no longer qualify.
  • Qualified Opportunity Zone investment: a brand-new provision in the Tax Cuts and Jobs Act allows capital gains to be deferred until as late as 2026 if the gains are rolled into investments in a designated Opportunity Zone. If the investment in the Opportunity Zone is held for at least 5 years, 10% of the original deferred gain can be permanently excluded. In addition, any gains from the investment in the Opportunity Zone can be excluded from income if the investment is held for at least 10 years!
Employee Spotlight - Kendra A. Riehl
Kendra joined the Soukup, Bush, & Associates team in August of 2018. At the firm, she assists other team members in preparing individual and business tax returns.

She moved to Fort Collins from the San Luis Valley in southern Colorado where she grew up and attended Adams State University. In May 2018 she graduated with a Bachelor of Science degree in Business Administration with an emphasis in Accounting and a minor in Taxation.

Kendra spends all of her free time with her husband Alex. They enjoy doing many things together such as playing volleyball and baseball, running, as well as attending their church and exploring new breweries and wineries.
   
         If you have any questions about how any of the above strategies might apply to your tax situation, please contact us at (970) 223-2727.


Sincerely,