What are Capital Gains?

    To understand capital gains tax, let’s start with the basics. What are capital assets? 

    A capital asset is any property held for personal or investment purposes. This includes tangible assets like stocks, bonds, and real estate and intangible items like patents, trademarks, and brand equity.  

    A capital gain, or profit, may be generated when a capital asset is sold. Generally speaking, the gain is the difference between what you paid for an asset and its sale price. Alternatively, capital losses occur when you sell an asset for less than what you paid for it. Oftentimes, you can offset capital gains with capital losses. Capital gains, net of losses, are reported and taxed as income. Tax rates for capital gains depend on your income level and the type of asset. If your losses exceed gains, you can deduct up to $3,000 from ordinary income each year. 

    EP Wealth Advisors uses proven strategies to balance larger investment goals and market conditions with tax minimization.   We monitor your tax situation and make strategic adjustments that can potentially—and positively—impact your after-tax returns on investments.  

     

    Capital Gains Tax Management Strategies

    Capital gains tax management involves several strategies that, when implemented effectively, support your overall financial planning objectives. 

     

    Timing Asset Sales Strategically 

    When you sell an asset matters. While it may be tempting to sell high-performing investments quickly to generate cash, it’s essential to step back and consider how the timing of a sale affects taxes. Holding onto investments until they qualify for lower long-term capital gains will reduce your tax obligation. 

    That is because investments held for less than a year are taxed at a higher short-term capital gain rate, while investments held for at least a year are taxed at a lower long-term rate. For high earners, the difference can be substantial. 

     

    Tax-Loss Harvesting to Offset Gains

    Tax-loss harvesting is another tool for lowering taxes. It involves selling one investment at a loss to offset capital gains from the sale of another, reducing taxes by decreasing the amount to be claimed as income or capital gains. 

    This option may primarily benefit individuals in higher tax brackets who could potentially reap more significant savings come tax time. 

     

    Tax-Advantaged Accounts

    Tax liability is also affected by the types of accounts used for different investments. Placing high-growth potential investments in 401(k)s, IRAs, and other tax-advantaged accounts allows assets to grow without immediately subjecting them to taxes. 

    There’s another reason why retirement accounts are appealing. You can buy and sell investments within them without triggering capital gains taxes because these transactions are not taxable.

    When you sell stocks or other investments, you risk tax consequences. However, a thorough, balanced capital gains tax management plan helps mitigate that risk. EP Wealth's financial planning advisors review your portfolio and make recommendations to manage capital gains and support your financial goals. Find an advisor near you to learn more about comprehensive portfolio management with EP Wealth Advisors.

    DISCLOSURES:

    • EP Wealth Advisors, LLC. is registered as an investment advisor with the SEC and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the advisor has attained a particular level of skill or ability.
    • Request an appointment with an EP Wealth Advisor when you have a minimum of $500,000 in investable assets – which includes qualified retirement plans (IRA, Roth IRA, 401(k), taxable brokerage, cash (savings / checking) and CDs. Investable assets do not include your home, vehicles, or collectibles.
    • Hiring a qualified advisor and/or financial planner does not guarantee investment success, and does not ensure that a client or prospective client will experience a higher level of performance or results. No guaranty or warranty is made that any direct or implied results or projections being represented here will be met or sustained.
    • The need for a financial advisor or financial planner and/or the type of services required are specific to the uniqueness of each individual’s circumstances. There is no guarantee or warrantee that the services offered by EP Wealth Advisors, LLC will satisfy your specific financial services requirements. Services offered by other advisors may align more to your specific needs.
    • Information presented is general in nature and should not be viewed as a comprehensive analysis of the topics discussed. It is intended to serve as a tool containing general information that should assist you in the development of subsequent discussions. Content does not involve the rendering of personalized investment advice nor is it intended to supplement professional individualized advice.
    • All investment strategies have the potential for profit or loss. Different types of investments and investment strategies involve varying degrees of risk, and there can be no assurance that any specific investment strategy will be suitable or profitable for a client’s portfolio. The risk of loss can never be eliminated even if working with a professional.
    • All expressions of opinion reflect the judgment of the advisor as of the date of the presentation and are subject to change. Market expectations are based on assumptions that may not come to pass. Portfolio positioning and equity outlook are rough estimates and are also subject to change.
    • There is no guarantee or warrantee that a client or prospective client that engages EP Wealth Advisors, LLC in Business Planning services will experience investment success and does not ensure that a client or prospective client will experience a higher level of performance or results. No guaranty or warranty is made that any direct or implied service, offering, report, or analysis represented here will be offered or delivered. The services offered to clients will vary and depend on several factors.
    • Laws vary by state. The information presented herein is intended to be general in nature and may not apply to your state of domicile. Please consult local legal counsel to determine the best practices for your state.
    • Please consult with a CPA, tax professional, and/or attorney regarding your specific situation before implementing any of the strategies referenced directly or indirectly herein.

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