Using 1031 exchanges and qualified opportunity zones to reinvest the proceeds from the sale of an appreciated asset can defer and sometimes eliminate capital gains taxes.
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Experienced and successful investors know that their investment wealth faces two powerful enemies at all times: bad investments and capital gains taxes.
Invest long enough, and you will inevitably encounter an investment that could have, would have, should have — but didn’t — appreciate in value. Even Warren Buffett has picked the occasional clunker in his long and legendary career, but by cutting losers short, letting winners run, and paying close attention to position sizing and diversification principles, no investor needs to be crippled by any bad investment.
The other enemy is a stealth opponent, one that chips away steadily at even the best investors: capital gains taxes, which can siphon off up to 23.8% of the gain for investments held more than a year and as much as 40.8% for investments held for less than a year. (That’s just the federal tax — 41 states also levy their own capital gains tax, which adds an average of an additional 5% to the tax bill and can range much higher in certain states.)
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Daniel Goodwin is a Kiplinger's contributor on various financial planning topics and has also been featured in U.S. News and World Report, FOX 26 News, Business Management Daily and BankRate Inc. He is the author of the book Live Smart - Retire Rich and is the Masterclass Instructor of a 1031 DST Masterclass at www.Provident1031.com. Daniel regularly gives back to his community by serving as a mentor at the Sam Houston State University College of Business. He is the Chief Investment Strategist at Provident Wealth Advisors, a Registered Investment Advisory firm in The Woodlands, Texas. Daniel's professional licenses include Series 65, 6, 63 and 22. Daniel’s gift is making the complex simple and encouraging families to take actionable steps today to pursue their financial goals of tomorrow.
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