The Trend

Tax Time: How to Save on 2016 Capital Gains Taxes



Death and taxes… They’re two of life’s certainties.

And while some would jokingly argue that death is the better of the two, it is what it is.

Fortunately, there are ways to decrease your tax burdens to make life a bit easier.

Let’s keep it simple.

Over the last several months, the stock market has exploded in value for both short-term and long-term investors. And while we’ll get to keep most of the winnings, we’ll also have to fork some of it over to the government.

If not, they’re happy to send an IRS agent to your home with papers, and the potential for wage garnishments and account freezes.

I’ve seen it happen to people.  It’s not fun.

Again, though, you can decrease your burden when it comes to your capital gains taxes, or the difference between the original cost of the stock – and your sales price. 

For example, if you bought a stock at $50 and it ran to $75, the capital gain tax applies to the $25 profit just made.

Then, it depends on if that’s a short-term capital gain (held for less than a year), or a long-term capital gain (held for more than a year).

  • With current long-term capital if your income level falls inside the 10% to 15% tax bracket, the long-term capital gains tax is 0%.  With a 25% to 35% tax bracket, the tax is 15%.  Above that, the long-term capital gains tax is 20%.
  • Short-term gains can be taxed at ordinary income rates of between 10% and 39.6%. 

For tax year 2017, that could improve under President Trump, though.



He has proposed that we keep the current long-term capital gains tax of 0%, 15% and 20%, but wants to reduce the number of tax brackets from seven to three, which could also reduce the capital gains taxes, as well.

We’ll have to wait and see how that pans out.

Also, if you have losers in your portfolio now, you may want to consider jumping out of them, and using the loss to your advantage. 

By selling a stock that has declined in value, you can offset that loss against your investment gains, thereby allowing you to lower your tax bill.

For example, let’s say you bought a stock and made a profit of $5,000.  If you held the stock for longer than a year, you would owe long-term capital gains tax.

However, it’s possible to pay nothing on that if you have a loss.

Let’s now say you bought another stock and you lost $4,000 on it.  That partially offsets most of the prior $5,000 win.  In the end, you’d owe capital gains taxes on $1,000.

Better yet, consider maxing our your contributions to a 401(k), especially if your company matches it. 

Charitable donations are also tax deductible. 

And if you have flex spending with you company – which is pre-taxed – consider using it all prior to the end of the year, or it will become worthless.

Of course, it’s always a good idea to check with an accountant though to make sure you’re not also missing out on further deductions.

To you and your families, have a very happy, healthy and profitable New Year.

From all of us at 52Patterns, we wish you all the very best.  Here’s to a great New Year.