Investments
Profits you earn from selling investments can qualify for favorable capital gains tax rates. Capital gains on most investments held for more than one year are taxed at just 15%. Moreover, if you are in will be taxed at %10% or 15% bracket, your capital gains 5%. In contrast, if you hold your investment for one year or less, your capital gains will be taxed at regular tax rates, which may be as high as 35%.
Collectibles
Gains earned from selling collectibles do not qualify for the long-term capital gains tax rates (15%/5%). However, if your holding period for a collectible is over one year, then top 28% rate applies.
Qualified Small Business Stock (Section 1202 Stock)
You may exclude from your income 50% of capital gain you realize when you sell qualified small business stock if you held your shares for more than 5 years (certain limits apply). The tax rate on the remaining 50% similar to collectibles is capped at 28%.
In case you did not hold the shares 5 years, you still may avoid paying the tax on the gain by electing to rollover a gain from the sale or exchange of the stock after you have held your shares for more than six months. To complete rollover, you must invest the sale proceeds in other qualified small business stock within 60 days.
Depreciable Real Estate
If you sell depreciable real estate (e.g., residential rental property) that you held for more than a year, to the extent of allowable depreciation, your capital gains rate is capped at 25%.
Like-kind Exchanges
Using this method, instead of selling the property, you exchange it for like-kind property and pay no taxes on the exchange. The like-kind exchange is often used for real estate. However, any appreciate business or investment property would qualify. Unfortunately, securities and certain types of assets do not qualify for this tax break.
