Almost every portfolio will one day need to support a steady withdrawal as your savings turns into your retirement money. However, to turn your investments into money you can spend, some securities need to be sold. Every time a security is sold in a taxable account, if it is worth more at the time of sale than you originally paid for it, the “gain” is taxable. This so-called capital gain is taxable in various tax brackets, ranging from a base of 0% to 20%.

If you wait to sell any securities until the day you want to withdraw, chances are you will be forced to realize some rather large capital gains all in one year. After all, the markets trend upward and, over large time periods, double every 7 to 10 years.

There are many techniques to manage your capital gains for smart tax planning.

For clients in 0% capital gains bracket, we do a tax analysis and intentionally realize some gains each year can keep taxes relatively low.

For others, we have many strategies for avoiding paying the capital gains tax.

For those at the highest rates, we harvest capital losses as they occur and then use them on current and future taxes as a part of a Tax-Loss Harvesting plan.

Your Estate Plan Might Disadvantage Your Heir’s Cost Basis

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Is what I’m accomplishing here worth sacrificing the step up in basis? If it is not, perhaps there is a better way to implement your estate wishes.

Using Math to Decide When to Realize Capital Gains

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These are complex formulas, but they are valuable calculations that show that there is an expected increase of return which will justify selling even a highly appreciated asset.

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