With a 4% increase in retail investors from 2020, many new investors and retiring professionals are arriving at their first capital gains tax obligations. For any taxpayer with an appreciating asset, they will owe a specific percentage (%) of tax from their profits upon sale. Does this apply to you, and should you be planning to set aside those funds? Have you recently sold a share, home, or cryptocurrency? Let’s dive deeper.
Brokerage platforms, notable ones such as Robinhood, TD Ameritrade, Charles Schwab, and more are becoming more accessible to individual investors with free or low-cost trading rates. In addition, social media and increased information has gradually lowered the traditional obstacles to investing within the stock market, where it is now easily accessible for most individuals.
For the simplest explanation of a capital gain: a capital asset (such as a stock share, real estate, piece of art, or even physical land) is sold for a price higher than the original buying price. This can apply to an individual selling a piece of art for $1,500, while they originally bought the art for $1000. The asset, the piece of art, appreciated in value to gain a profit upon sale. This profit is taxable and is now known as a capital gain.
How can you minimize your tax liability? Winn Financial excels in finding tax breaks and exclusions to decrease what you could owe. Our licensed professionals are experts with financial management, investment risk strategy, and tax settling to ensure that you are provided with all opportunities and services.
In this common example, an individual investor invested a few hundred dollars in the stock market during a recent surge:
- John Doe recently joined a brokerage platform to invest $500 into a few shares that he noticed on the news.
- John invested his entire $500 into XYZ share, and he gained a remarkable $318 during a short squeeze. He withdrew his money to amount to a total of $818.
- Since John traded his shares within 1-year, otherwise known as a short-term asset, he is now liable for a Capital Gains Tax.
How can you estimate how much Capital Gains Tax you will owe? This number depends on your location, income, and filing status, but you may use this calculator to help gain an idea of what you can owe. In addition, the filing statuses and liabilities can change with each new tax year, while the 2021 tax brackets can be found here.
Winn Financial has a dedicated department to managing individual finances and investment portfolios to assist you with long-term investments or any asset sales. Whether your investments are long-term or short-term, our experts provide you with decades of experience, knowledge, and technical expertise for all your financial needs.
Contact a Winn Financial expert to ensure you are receiving your mitigated obligations and confidence in receiving premier, personable support. Winn Financial is available at +1 714-888-5666 or info@winnfinancial.us to support all of your tax and financial management needs.
