When it comes to selling a stake in your business or managing long-term investments, capital gains taxes can take a significant bite out of your profits. If you’re not careful, these taxes can erode the wealth you’ve worked so hard to build. Fortunately, with the right strategies, you can minimize your tax liability, keep more of your earnings, and reinvest in your financial future.
At Insogna CPA, one of the best CPA firms in Austin, we specialize in helping business owners navigate the complexities of capital gains taxes with confidence and clarity. Located in South Austin, we offer personalized accounting services tailored to your unique financial situation.
❓ What Are Capital Gains Taxes?
Capital gains are the profits earned when you sell an asset—such as real estate, stocks, or a stake in your business—for more than its purchase price. The tax rate you’ll pay on these gains depends on how long you’ve held the asset.
- Short-Term Capital Gains: If you’ve owned the asset for less than a year, the profits are taxed as ordinary income, which can range from 10% to 37%.
- Long-Term Capital Gains: Assets held for over a year qualify for lower tax rates, typically between 0% and 20%, based on your taxable income.
Additionally, high earners may face the Net Investment Income Tax (NIIT), an additional 3.8% on top of their capital gains tax.
Our team at Insogna CPA, a leading Austin TX accounting firm, can help you understand how these rates impact your specific financial situation and develop strategies to reduce your tax burden.
💡 Strategies to Minimize Capital Gains Taxes
Let’s explore the proven strategies business owners can use to keep more of their profits while staying compliant with tax laws.
1. Time the Sale of Assets Strategically
Timing is everything. Selling your assets at the right time can have a significant impact on your tax bill.
- 📌 Hold for Long-Term Gains: Always aim to hold assets for more than a year to qualify for the lower long-term capital gains tax rate.
- 📌 Income Smoothing: Consider selling during a year when your taxable income is lower, such as after retirement or in a year with fewer other sources of income.
Our Austin tax advisors can help you time your sales strategically to maximize your tax savings.
2. Use Installment Sales for Business Stakes
If you’re selling a significant portion of your business, an installment sale can spread out the tax burden over several years.
- 📌 How It Works: Instead of receiving the full payment upfront, you structure the sale to receive payments over time.
- 📌 The Benefit: This allows you to report the gains incrementally, keeping you in a lower tax bracket each year.
We offer specialized expertise in this area as part of our accounting services in Austin for business owners.
3. Leverage Qualified Opportunity Zones
Opportunity Zones offer a unique way to defer and reduce capital gains taxes while supporting community development.
- 📌 Tax Deferral: By reinvesting your gains in a Qualified Opportunity Fund, you can defer taxes on the original gain until 2026 or until the new investment is sold.
- 📌 Tax-Free Growth: If the new investment is held for at least 10 years, any additional gains on that investment are entirely tax-free.
As one of the top CPA firms in Austin Texas, we can guide you through the Opportunity Zone process and its potential benefits.
4. Gifting Appreciated Assets
If you’re planning to share your wealth with family or give to charity, gifting appreciated assets can be a smart tax strategy.
- 📌 Family Gifting: Transferring assets to family members in lower tax brackets can reduce the overall tax liability.
- 📌 Charitable Contributions: Donating appreciated assets to a qualified charity eliminates capital gains taxes on the gifted portion and provides a tax deduction for the asset’s full market value.
Looking for a CPA in Austin Texas to help implement these strategies? Insogna CPA offers tailored solutions for small businesses and high-net-worth individuals.
5. Offset Gains with Tax-Loss Harvesting
You can reduce your taxable gains by selling underperforming assets to realize losses.
- 📌 How It Works: Capital losses can offset your capital gains dollar-for-dollar. If your losses exceed your gains, you can use up to $3,000 annually to offset ordinary income.
- 📌 Future Savings: Any unused losses can be carried forward to reduce taxable gains in future years.
Special Considerations for Business Owners
Section 1202 Qualified Small Business Stock (QSBS) Exclusion
If you’ve invested in a C Corporation that qualifies as a small business, you may be eligible to exclude up to 100% of the gains from your federal taxes.
- Eligibility: The stock must be held for at least five years, and the corporation must meet specific criteria outlined under Section 1202.
- The Impact: For qualifying stocks, you can exclude up to $10 million or 10 times your basis in the stock, whichever is greater.
Our Austin small business accountants can help you determine if your stock qualifies for this exclusion and guide you through the process.
S Corporation Tax Planning
As an S Corporation owner, you have unique opportunities to manage capital gains:
- Basis Management: Maximize the use of your stock basis to minimize taxable gains when selling your stake.
- Installment Sales: Spread gains over multiple years to reduce the immediate tax impact and manage cash flow effectively.
Partnering with Insogna CPA
Capital gains planning is complex, but with Insogna CPA—a trusted Austin accounting firm—you can make informed decisions that protect your wealth and minimize tax liabilities. Our team offers comprehensive accounting services to business owners across Texas, from small businesses to high-net-worth individuals.
Whether you need help with tax-loss harvesting, gifting strategies, or Opportunity Zone investments, our Austin TX accountants have the expertise to guide you every step of the way.
Ready to safeguard your wealth from big tax hits? Contact Insogna CPA today to schedule a consultation with one of the best CPAs in Austin!