Capital Gains Strategy with Trump Tax Plan

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As part of the new strategy modules for the Trump Tax Plan (part of the twice monthly coaching), we’re looking at specific strategies to take advantage of the new tax laws that started this year.

Here’s one from last Wednesday’s business strategy session. There are 4 more coaching calls this year. Wondering what to do about the Tax Cuts and Jobs Act? You’re already ahead of most American taxpayers who are just blissfully going forward, assuming everything is going to be okay.

At that same time, the government has issued dire warnings that 3 out of 10 Americans will pay additional taxes when they file this year. Most are probably expecting a refund, or at worst, to break even. No more! The Trump Tax Plan (Tax Cuts and Jobs Act) has changed the game. If your strategy hasn’t kept up, you’re going to get an unpleasant surprise this next year when you file your tax return.

Here’s the strategy that came out of our conversation about how capital gains has changed with the Trump Tax Plan effective 1/1/2018.

Trump Tax Plan Strategy #5: Time capital gains. Probably the biggest outlier to your tax planning will be capital gains. When you sell an asset with a lot of gain, you may find that you uncharacteristically bump your income up. Often that means you’ve just blown through the income threshold. First look for any possible capital losses to use as offset in that year. This is the year when you may want to just call it quits on that loser investment or dump some bad stock. It’s always best to match a capital gain with a capital loss.

Your capital gains income can not use the Section 199A 20% reduction, but even worse, it may increase your overall taxable income above the income threshold ($315K for married filing jointly/ $157.5% for single). If that happens, you may need to next look at the wage limitation rules. For a SSTB (specified service trade or business), you can use the wage limitation if your taxable income is from $315K – $415K (married, filing jointly) or $157.5K – $207.5K (single). Over the second income threshold for a SSTB and there is no reduction possible. For a non-SSTB company, you don’t have the problem of phase out. You have wage limitation rules if you’re above the first income threshold, though.

If the capital gains income kicks you up too high to try to reduce, then plan for the wage income rules. If you’re close to the first income threshold, look for what you can do to get below it.

That’s just one of the strategies that we talked about last Wednesday (10/17/18) at the evening coaching classes. If you sign up today, you can get a copy of the strategies provided you have signed up within 3 months of 10/17/18. Want more information? Check it out here !

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