In many parts of the country, you may not owe any capital gains taxes when selling your primary residence. When you sell your primary residence, you may be able to avoid paying a substantial amount of taxes on your gains. There are some tax advantages when you are selling real estate, specifically your primary residence. MORE FROM FORBES Roth IRA Contribution Income Limits For 2022 By David Rae If you have a Roth 401(k) or Roth IRA, your withdrawal will be tax-free, assuming you follow Internal Revenue Service (IRS) rules. You won’t owe any taxes on the gains in your retirement accounts until you make a withdrawal. Gains in your 401(k), traditional IRA, Defined-Benefit Pension Plan, 403(b), and tax-sheltered annuities (TSA) will be tax-deferred. Taxes on Investment Gains in Retirement Accounts Similarly, we were able to use some of the other investment losses to offset investment gains incurred on their equity compensation at work. We were able to capture more than $3,000 in short-term capital losses, which they used to offset regular income. On the bright side, this provided some opportunities for them to use tax-loss harvesting to reduce the taxes due on their regular income. I often take on new clients whose previous financial advisors appeared to have had the golden touch for picking terrible investments (probably part of why they are the previous financial advisor), as well as terrible market timing. This is especially true with the recent volatility we have seen so far in 2022. The soaring stock market of the past few years doesn’t mean all investments have seen large increases in value. That provides a great opportunity to lower your taxes with tax-loss harvesting. The good news is that up to $3,000 of short-term losses can be deducted against regular income each year. If you hold an investment for less than one year and then sell it, any gains, or losses, will be treated as short-term capital gains or short-term losses. When you realize short-term capital gains, they are typically taxed as ordinary income rates. MORE FROM FORBES Tax Planning Tips To Minimize Your 3.8% Medicare Surtax By David Rae Short-Term Capital Gains Rates 2022 This threshold is not pegged to inflation, so each year, more taxpayers can expect to get hit with the Net Investment Income Tax (NIIT). (Medicare surtax applies to incomes above $200,000 for single filers.) This Medicare surtax is applied to all investment income regardless of whether the capital gains are long-term or short-term capital gains. For example, married taxpayers with incomes of more than $250,000 will also be required to pay an additional 3.8% net-investment surtax. There may be additional taxes on investment income or lost tax deductions for people with higher incomes. MORE FROM FORBES New Standard Deduction And Higher New Tax Brackets For 2022 By David Rae Medicare Surtax on Capital Gains Income Those with incomes above $517,200 will find themselves getting hit with a 20% long-term capital gains rate. However, married couples who earn between $83,350 and $517,200 will have a capital gains rate of 15%. Married couples with incomes of $83,350 or less remain in the 0% tax bracket, which is excellent news. The brackets are a tiny bit bigger for married couples who file their taxes jointly, but most will see their investment income hit by the marriage tax penalty. Single filers with incomes more than $459,750 will get hit with the 20% long-term capital gains rate. Most single people with investments will fall into the 15% capital gains rate, which applies to incomes between $41,675 and $459,750. For single tax filers, you can benefit from the zero percent capital gains rate if you have an income below $41,675 in 2022.
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