Capital Gains & Wealth Building

Posted on February 9, 2025 by TheWealthIncreaser.com

Learn more about capital gains and how they are taxed…

Caution: 30-minute read

Even with all that is happening with tariffs and uncertainty on the world stage, there are some bright spots in spite of it being the tax season in the United States.

Although there is much that is simple and uneventful in the tax code, there also are more complex topics that could be more challenging for you when it comes to using the tax code to your benefit and you want to be aware of them proactively as opposed to re-actively.

Whether it is the sale of your home and the exclusion of gain, ($500,000 married and $250.000 singe if you qualify), using Depreciation/Mileage, using Retirement Deductions/Savers Credit, Schedule A Deductions along with numerous other deductions that may appear complex but could be of real benefit to you at this time or at a time in your future, if you qualify or potentially qualify–you need to know about them.

Therefore, you want to be aware of them “prior to” filing your tax return–not after so that you can reach your immediate, short-term, intermediate and long-term goals in a more satisfying manner!

Just so we are all on the same page TheWealthIncreaser.com will define a few terms so that you can comprehend this discussion with more clarity:

Interest—a charge for borrowed money generally a percentage of the amount borrowed.

Deferral of gain–In a exchange, the deferred gain is the amount of gain that escapes current taxation and is deferred until a later date. Deferral of gain is a strategy that is often used in 1031 exchanges involving like-kind property by savvy investors who desire not to pay taxes at the time, and desire to prolong the payment of capital gain taxes to a date in the future and in some cases after they transition.

Dividends—a dividend is a distribution of a company’s earnings to eligible shareholders (not all companies pay dividends).

Ordinary dividend—ordinary income is income earned by an entity or an individual that is taxable at marginal tax rates, therefore an ordinary dividend that you received would be taxed at your marginal tax rate.

Qualified dividend—a qualified dividend is an ordinary dividend reported to the Internal Revenue Service (IRS), which taxes it at capital gains tax rates which are generally more favorable to most taxpayers.

Realized gain—a real profit that shows up not only on paper, but also in your bank or investment account. A realized gain is an increase in value of an asset or investment you own and have sold or cashed-in on. A tax occurs only when sold and if held for over a year the gain would be taxed at the capital gains rate based on your income. Exceptions may apply in certain situations based on the asset classification, timing of the gain, and your income level as the AMT or NIIT could apply, thus increasing the taxation on the gain.

Unrealized gain—a potential profit that shows up on paper or an increase in value of an asset or investment you may own but have not sold or cashed-in on. A tax occurs only when sold. Realized and unrealized losses also follow the same logic, as there is either a paper loss or an actual loss, depending on the actions you take or fail to take–and at what time you take those actions (short versus long-term).

Capital asset–capital assets among others include stocks, bonds, mutual funds, 529 plans, real estate, sale of business, crypto, collectibles etcetera. Capital assets are significant pieces of property such as homes, cars, investment properties, stocks, bonds, mutual funds, ETFs and even collectibles or art.

Although there are exceptions, capital gains can be short (taxed as ordinary income) or long term (taxed at the generally more favorable capital gains rate of 0, 15, or 20%) and deferred as in the case of a “successful” 1031 exchange or installment sale!

In many instances you will have to pay capital gains taxes if you sell a capital asset for a gain and in some cases a capital loss can be used to offset capital gains to a limit. In this discussion TheWealthIncreaser.com will focus on the topic of capital gains so that you can use the concept to achieve more during your lifetime.

Common “exceptions” to standard capital gain rates:

Collectibles (taxed at the higher 28% rate)

Owner Occupied Real Estate (all or a portion may be excluded from taxation depending on the amount of gain))

Rental Real Estate (depreciation add back may increase your capital gains tax)

1031 exchange (a successful exchange can defer your taxes to a later date once property is sold)

Installment Sale (instead of being taxed in one year, your gain would be taxed over a number of years and that could have the effect of lowering your overall capital gains tax)

Art/Collectables capital gain rate is 28%

Antique Cars capital gain rate is 28%

All of the following are taxed at the higher capital gain rate of 28%:

Works of art
Rugs and antiques
Metals and gems (gold, silver, platinum, palladium etcetera)
Stamps and coins
Alcoholic beverages (fine wines, rare whiskeys, vintage champagnes, craft beers, limited edition spirits etcetera)

Note: Additionally, the IRS reserves the right to classify any other tangible personal property as a collectible for tax purposes. And there are some limited exceptions for certain metals, gems, and coins. Additionally, if you have some of the above assets inside of a fund in a non-physical form, you might be able to avoid the higher 28% rate.

Essentially, if you sell your collectible for a profit, you will face capital gains tax. As you would expect, the amount you’ll owe depends on how long you’ve held onto the item (short versus long-term).

For short-term holdings of one year or less, any profit is taxed as ordinary income at your marginal federal tax rate.

Long-term gains, on the other hand, are treated differently:

If you’ve held the collectible for over a year, you’ll be subject to a maximum tax rate of 28%. This rate is higher than the typical long-term capital gains tax rates of 15% or 20%.

Why is this rate higher? The federal government basically wants to discourage speculation in potentially volatile markets and encourage investments that contribute more directly to economic growth. Also, while the maximum 28% rate for long-term collectible gains exceeds rates for other assets, it’s still lower than short-term rates taxed as ordinary income for those in the higher income tax brackets.

Determining your tax liability on a collectible sale involves a few steps. First, you need to establish “your basis” in the item.

For purchased collectibles, like silver bars, for example, your basis is generally the original cost plus any associated fees, such as costs for restoration (for hobbyists), expenses for specialized storage (climate-controlled facilities for art and other collectibles), or fees paid to brokers or dealers to obtain the asset.

If you inherited the collectible, your basis would be its fair market value “at the time” of inheritance (adjusted basis).

Once you’ve determined your basis, subtract it from the sales price to find your capital gain. This gain is then subject to the appropriate tax rate based on your holding period and income level.

Bonds–varies as municipal bonds may be tax exempt at the federal and possibly state level.

Cancellation of Debt–could in many cases be taxed at your ordinary income tax rate–you and the IRS would receive a 1099-C from the issuer who canceled your debt.

Collectibles–taxed at 28% rate

To report sales for collectibles, use Form 8949. That information is then entered on Schedule D of Form 1040 to calculate and report your overall gains or losses.

Can the marginal rate on collectibles exceed 28%?

The effective tax rate on collectible gains can sometimes exceed 28% due to the net investment income tax (NIIT) and/or the alternative minimum tax or the more commonly known acronym AMT.

Net investment income tax (NIIT): Depending on your adjusted gross income, you might face a 3.8% net investment income tax on your gains. The NIIT is an additional tax on investment income for those with income exceeding specific thresholds (Modified Adjusted Gross Income of $200,000 for single filers and $250,000 for married couples filing jointly).

For more information, see What is Net Investment Income Tax?

Alternative Minimum Tax (AMT): If you are subject to the Alternative Minimum Tax (AMT), your effective tax rate could increase as well. Also realize that your state and local taxes can also contribute to a higher overall tax burden when it comes to gains on collectibles and other capital assets.

Corporate Bonds

Interest earned from corporate bonds are fully taxable at all levels. Because corporate bonds typically have the “greatest risk” of default, they pay the highest interest rates of any bond. Investors who own 100 corporate bonds at $1,000 par value, with each paying 6% annually, can expect to receive $6,000 of taxable interest income each year, unless the account was held inside of a retirement account.

Corporate earnings–ordinary income rate of 21%

Short-term capital gains arise from the sale of assets held for a year or less and are taxed at the corporation’s ordinary income tax rate.

Corporate capital gains

Long-term capital gains result from selling assets held for more than a year and are generally taxed at a lower rate. This tax advantage encourages corporations to adopt strategic asset management practices, often opting to hold assets longer which normally strengthens the economy. The type of asset sold also influences the capital gain classification. For example, gains from selling depreciable business property, like machinery, may follow different tax rules than gains from investment securities.

Amortization of Bond Premium

The amortizable bond premium refers to the price paid for a bond above its face value. The premium paid represents part of the cost basis of the bond, can be tax-deductible, and amortized over the lifespan of the bond.

Amortizing the premium can be advantageous since the tax deduction can offset any interest income the bond generates, thus reducing an investor’s taxable income.

Are there Tax-Free Bonds?

While investors will pay federal taxes on the interest income from government bonds, they won’t owe state and local taxes. Investors in municipal bonds can avoid taxes altogether if they live in the area where the municipal bond is issued.

Series EE and I bonds can be taxed at time bond is cashed in or annually if elected by the bond holder.

What Is a Corporate Bond?

A corporate bond is a type of debt security issued by a corporation and sold to investors to raise capital. In return for the bond purchase, you would be paid interest at either a fixed or variable interest rate.

Bond Treatment on Tax Returns

Bond income is reported alongside any other interest income earned during the year, which may include interest income from savings accounts, certificates of deposit (CDs), and similar type products.

The tax implications for investors in fixed income can vary, according to the type of security that they purchase. If taxable bond income is a main component of your annual taxes, you can consult a certified public accountant (CPA) or other professionals to assist with tax planning strategies that may reduce or eliminate what you owe.

Before investing in a bond fund or any fund, consider the fund’s objectives, risks, charges, and expenses and read the prospectus prior to–not after selecting your fund. Also look at tax-efficiency as a bond fund and investments inside of a retirement account allows you to defer (postpone) taxes until you begin withdrawals at a future date (during your retirement years if all goes as planned).

Crypto Currency—considered an asset and capital gains would apply. Cryptocurrency is treated as property for tax purposes in the United States, meaning that any profits from selling or using it are subject to capital gains tax. You must report any taxable events, such as selling or trading crypto or other digital assets, on your tax return. Additionally, if you own cryptocurrency and digital assets you must disclose if you have movement of those assets, along with disclosing if you have foreign holdings.

Gaming/Gambling—if you file your taxes using schedule A you can deduct your gambling losses (keep good records) up to the extent of your gains thus reducing your gain that would be taxed at ordinary income rates up to 37%. In many instances you would receive a form W-2G from the issuer (many winnings over $5,000 will have withholdings up to 24%) and the IRS would also receive a copy.

Gold Bullion/Precious Metals–when it comes to tax purposes, the IRS classifies precious metals held in physical form as collectibles, and thus they may potentially be taxed at the maximum collectable capital gains rate of 28 percent.

Government Bonds

The interest from Treasury bills, notes, and bonds are taxable at the federal level but not at the state and local levels. In addition, some U.S. government agency securities, such as those issued by Fannie Mae, are taxable at the federal level but exempt from state and local taxes.

Municipal Bonds

Municipal bonds are generally tax-free at the federal level and may be tax=free at the local or state level if issued and purchased by you in the area that you reside. Often purchased by high-income investors, municipal bonds can mean tax-free investment income when utilized in a strategic manner.

Zero-Coupon Bonds

Although they have no stated coupon rate, zero-coupon bond investors must report a prorated portion of “interest” each year as income.

A zero-coupon bond is an investment in debt that does not pay interest but instead trades at a deep discount.

The profit is realized at its maturity date when the bond is redeemed for its full-face value. Always realize that zero-coupon bonds are issued by governments at discounts, and they mature at par values, where the amount of the spread is divided equally among the number of years to maturity. Consequently, zero-coupon bonds are taxed as interest, just like any other original issue discount bond.

529 Plans have no capital gains or ordinary income taxes assessed on money in a 529 Plan and when the money is withdrawn, as long as it is used for a qualified purpose, there are no taxes due whatsoever.

Because of tax reforms that went into effect on January 1, 2018, plans now allow up to $10,000 per year per beneficiary to be used towards K-12 private school education.

In addition, the SECURE Act changed the 529 Plans’ list of qualified purposes to include certain apprenticeship programs, and to allow up to $10,000 to be used (only once, not annually) to reduce student loan debt for the named beneficiary.

The contribution limits for 529 Plans are the same as the federal annual gift tax exclusion, which is $18,000 per donor, per year, as of 2024.

ROTH IRA–contribution withdrawals are normally tax free, however earnings are taxable unless 5-year rule and age 59 1/2 rule is met prior to withdrawal otherwise taxable with penalty unless an exception applied. Mandatory withdrawals are not required at age 73.

Traditional IRA & Retirement Plans–capital gain taxes are normally deferred, early withdrawals (before age 59 1/2) would be taxed as ordinary income and incur a 10% penalty unless an exception applied. Mandatory withdrawals are normally required at age 73.

Other–my asset doesn’t appear on this post.

More research may be necessary by you or your financial professional(s) to determine if you must pay capital gains or any other taxes on the asset in question. Additionally, the IRS reserves the right to classify any other tangible personal property as a collectible for tax purposes.

Due to the importance of real estate in the building of wealth in many households, the capital gains implications will be discussed in detail below so that you can build wealth more efficiently.

Capital Gains & Real Estate

Personal rental real estate 2 of 5 rule not met 0%, 15% and 20% capital gains rate apply on rental properties sold (depreciation that you claimed or failed to claim as a deduction over your years as a rental owner will be added back thus increasing your gain)

Personal real estate 2 of 5 rule met $250,000 exempt from taxation for single and $500,000 if married (technicalities apply) will be exempt if your gains don’t exceed these limits and you otherwise qualify

Rental Real Estate 0%, 15% and 20% on rental properties sold

Sale of Business form 4797, 0%, 15% 20% or other rate may apply depending on time that business or assets are sold along with the depreciation calculation

Refinance your home or rental property (considered a loan and no capital gains or any taxation, if proceeds are used for home improvement, interest repayment may be deductible on your tax return)

Many people know the basics of the capital gains tax and are aware that gains on the sale of personal or investment property held for more than one year are taxed at favorable capital gains rates of 0%, 15%, or 20%, plus a 3.8% net investment income tax for people with higher incomes, but many are unaware that:

The capital gains rates are based on set income thresholds, which are adjusted annually for inflation.

For 2024, the 0% rate applies to individuals with taxable income up to $47,025 for single filers, $63,000 for head-of-household filers, and $94,050 for joint filers.

The 15% rate is for individuals with taxable incomes between the 0% and 20% break points of $47,026 to $518,900 for single and $94,050 to $583,750 for joint filers.

The 20% rate starts at $518,901 for single filers, $551,351 for head-of-household filers and $583,751 for joint filers.

Residential Real Estate

Compared to long-term gains, the sale of personal or investment property held for one year or less, which are taxed as ordinary income rates up to 37%, the 0, 15%, and 20% rates appear quite appealing. There are also “a lot of exceptions” to these general rules, with some major advantages applying to residential real estate that you must be aware of.

With many residential home sales, the profit isn’t even taxed at all. That’s because of the home sale exclusion that is available if you have owned and lived in your main home for at least two out of the five years before the sale date. You could avoid capital gains tax on up to $250,000 ($500,000 for joint filers) of your gain from the sale. Any gain above the $250,000 or $500,000 exclusion amounts is taxed at long-term capital gains rates. If you had a loss from the sale of your primary home, “the loss is not” deductible.

Let’s say you’re married, bought your home in 2005, have a tax basis of $150,000, and are selling the home for $550,000. The entire $400,000 gain is tax-free to you and your spouse (Call me now and let’s party–LOL).

Let’s now take the same example, but instead of selling your home for $550,000, you sell it for $900,000. The first $500,000 of the gain is tax-free, and the remaining $250,000 is taxed at long-term capital gains rates. (Call me now and let’s really party–LOL).

To determine your gain or loss from the sale of your primary home, you start with the amount of gross proceeds reported in Box 2 of Form 1099-S and subtract selling expenses such as commissions to arrive at the amount realized.

You then reduce that figure by your tax basis in the home to come up with your gain or loss.

To figure the tax basis in your home, start with the original cost, including the mortgage if you financed the purchase, add certain settlement fees and closing costs, plus the cost of any additions as well as improvements that add to the value of your home, prolong its useful life, or adapt it to better uses.

IRS Publication 523 has some examples of improvements that increase your tax basis in the home and those that don’t. Examples of big-ticket items that are added to your basis include adding a room, installing new air-conditioning, renovating a kitchen, finishing a basement, or putting in new landscaping or a pool. Even small-scale capital improvements can increase basis. These include new doors and windows, duct and furnace work, built-in appliances and water heaters.

Repairs, maintenance and improvements that are necessary to keep your residence in good condition but don’t add value or prolong its life generally will not increase your basis.

If you claim a tax credit or otherwise receive a subsidy for putting in energy-savings improvements in your home, you must first reduce the cost of the system by the tax credit or subsidy that you received before increasing your home’s tax basis.

More on the Home Sale Exclusion: Capital Gains Tax Home Sale Exclusion, What You Need to Know

If you must sell your home early, you may still be eligible for a portion of the exclusion, depending on the circumstances that led you to sell. If your home sale was prompted due to job changes, illness, or unforeseen circumstances, you may qualify for a partial exclusion.

The percentage of the $500,000 or $250,000 gain exclusion that can be taken is equal to the portion of the two-year period that you used the home as a residence.

For example, say you as a single person bought a home for $600,000 in March 2023, lived in it for 15 months, and sold it in May of last year for $685,000 after moving out of state due to an illness. The maximum gain exclusion in this instance is $156,250 ($250,000 x (15/24)). So, the $85,000 gain is fully excluded and tax-free. You can also use days or months for this calculation.

Death of a spouse and selling primary home

A spouse who sells the family home within two years after the death of the other spouse gets the full $500,000 exclusion that is generally available only to couples, provided the two-out-of-five-year use and ownership tests were met before death.

There is also a welcome added tax benefit if you owned the home jointly with your spouse.

If you don’t live in a community property state, half of the home will get a step-up in tax basis upon the death of the first-to-die spouse.

The rule is more generous if the house is held as community property. The entire tax basis is stepped up to fair market value when the first spouse dies.

Here’s an example.

Let’s say you and your spouse bought a home for $150,000 many years ago in a non-community property state, and it is worth $980,000 on the date that your spouse dies. As the survivor, your tax basis in the home jumps to $565,000 (your half of the original $150,000 or $75,000 basis plus half of your deceased spouse’s $980,000 or $490,000 date-of-death stepped-up basis value).

Twenty months later, you as the surviving spouse sell your home for $1,100,000. Of the $535,000 gain from the home sale ($1,100,000 – $565,000), $500,000 is tax-free and $35,000 is taxed at long-term capital gains rates that would be determined by where you would fall based on your tax bracket.

Home office deduction and selling a primary home

You may be wondering whether the capital gain tax on the sale of your home would differ if you took the home office tax deduction in prior years for using a room or other space in your residence exclusively and regularly for business or rental (e.g., as a home office or the rental of a spare bedroom).

It depends, but generally, the tax consequences are the same whether or not the home office deduction was previously claimed. Gain on the office or rental portion generally qualifies as part of the $250,000/$500,000 capital gains tax exclusion for a primary home sale, subject to two exceptions.

The first is for so-called unrecaptured Section 1250 gain, which applies “if you took depreciation deductions in the past” for the office or rental space. If you used the simplified method to claim home office deductions on your return, you don’t have to worry about recapturing depreciation claimed in years prior to your home sale.

The second exception applies if the workspace or rental space is in a building on the property separate from the main home — think first-floor storefront with an attached residence, rented apartment in a duplex, or working farm with a farmhouse or other unattached building on the property.

Rental property and capital gains calculation

If you hold rental property, the gain or loss when you sell is generally characterized as a capital gain or loss. If the property was held for more than one year, it’s a long-term capital gain or loss, and if held for one year or less, it’s a short-term capital gain or loss.

The gain or loss is the difference between the amount realized on the sale and your tax basis in the property.

The capital gain will generally be taxed at 0%, 15%, or 20%, plus the 3.8% net investment income surtax for people with higher incomes.

However, a special rule that you must be aware of applies to gain on the sale of rental property for which you took “depreciation” deductions!

When depreciable real property held for more than one year is sold at a gain, the federal tax law requires that previously deducted depreciation be recaptured into income and taxed at a top rate of 25%. This is known in the tax industry as unrecaptured Section 1250 gain, and the name is based on the number in the federal tax code section.

Sale of vacation home and capital gains

Gains from the sale of vacation homes don’t qualify for the $250,000/$500,000 capital gains tax exclusion that applies to the sale of main homes. You will pay tax on the entire amount of your profit and if you are contemplating the sale of your vacation home–you must prepare in advance for the tax consequences.

When you sell a vacation home, your gain will be subject to the normal capital gains tax on real estate!

Therefore, if you’ve owned the vacation home for more than one year before you sell, the difference between your amount realized on the sale and your tax basis in your home is subject to capital gains tax rate of 0%, 15%, or 20%, depending on your income, plus the 3.8% net investment income surtax if you are in the upper-income tax brackets.

If you owned the vacation home for a year or less, then any gain from the sale will be taxed at “ordinary income tax rates” up to 37%.

For example, say that in 2024, you sell a vacation home that you owned since 2010 for $875,000, and you have a tax basis of $635,000. Your $240,000 gain is taxed at long-term capital gains rates. And just as you can’t deduct a loss with your primary residence, so too is the case with your rental property.

What if you convert a vacation home to your primary residence, live there for at least two years, and then sell your home? Can you qualify for the full $250,000/$500,000 capital gains tax exclusion?

Probably not, but it depends!

If you sell a main home that you previously used as a vacation home, some or all of the gain is ineligible for the home-sale exclusion.

The portion of the gain that is taxed is based on the ratio of the period after 2008 that the home was used as a second residence or rented out to the total time that you as the seller owned the house.

The remaining gain is eligible for the $250,000 or $500,000 home-sale exclusion.

Short sale of your main home and capital gains

After the great financial downfall in 2008, many financially distressed homeowners sold their home as a short sale in order to get from underwater mortgages on their home. If you are considering a short sale of your home, you want to know the tax consequences upfront.

A short sale occurs when your mortgage lender agrees to accept less than the outstanding balance on your loan to help facilitate a quick sale of the property.

The tax rules applicable to short sales differ depending on whether the debt is recourse or non-recourse!

Recourse debt is when the owner/debtor remains personally liable for any shortfall. If the lender forgives the remaining debt, a special tax rule provides that up to $750,000 in forgiven debt on a primary home is tax-free.

The owner/debtor will be taxed on any remaining forgiven debt at ordinary income tax rates up to 37%.

The tax results are different for nonrecourse debt, meaning the owner/debtor isn’t personally liable for the deficiency and in this case, the waived debt is included in the amount realized for calculating capital gain or loss on the short sale.

For primary homes, no loss is allowed, and up to $250,000 of gain ($500,000 for joint filers) can be excluded from income for homeowners that meet the two-out-of-five-year use and ownership tests!

These same rules apply if your home is foreclosed on.

Main Home Destruction and capital gains

If your principal residence is damaged or destroyed in a hurricane, tornado, widespread wildfire, or other federally declared disaster, you’ll have gain to the extent the insurance proceeds you receive exceed your pre-disaster tax basis in the home.

Up to $250,000 ($500,000 for joint filers) of that gain is excluded from income if you meet the two-out-of-five-year use and ownership tests. If your gain exceeded those amounts, your gain over those excluded amounts would then be taxed at capital gain rates.

One way to delay the tax hit on all or part of the otherwise taxable capital gains is to use the proceeds you get from your insurance company to buy a new home within four years of the disaster. The so-called “involuntary conversion” rules are complex, so be sure to contact your tax adviser or other professional if you are thinking about this option.

Refinancing of your home or rental property and capital gains

As stated earlier and reiterated again, a refinance or tapping into your home equity are considered loans and no capital gains or any taxation on the proceeds will occur. Furthermore, if funds are used for home improvement, interest repayment may be deductible on your tax return annually.

Always keep in mind that with a refi you must have an effective repayment plan in place and there will normally be closing costs that can get into the thousands. You also want to ensure that your credit is at an acceptable level if you are seriously considering this option.

If you failed to plan properly or not at all, a reverse mortgage is yet another option that you have if you find yourself in position where you need more income during your retirement years and you have a high equity position with your personal residence.

Section 1031 exchanges and capital gains tax

When real property used in a business or held for investment is exchanged for like-kind real property under Section 1031 of the tax code, all or part of the gain that would otherwise be triggered if the real estate was sold can be deferred. This tax break doesn’t apply to main homes or vacation homes, but it can apply to rental real estate that you own.

The Section 1031 exchange rules are very complicated and difficult to navigate, with many requirements that must be met in a timely manner. Therefore, make sure to talk to your tax adviser and/or other professionals if you are seriously contemplating a like-kind swap of rental real estate that you own.

Opportunity Zone Funds and deferral of capital gains

The Qualified Opportunity Zone program was created under the 2017 tax reform law, the Tax Cuts and Jobs Act (TCJA).

The program allows taxpayers to defer capital gains from the sale of business or personal property, including real estate, by investing the proceeds in entities called Qualified Opportunity Funds.

These QOFs then use the money to help the development of struggling communities.

As with many of the provisions in the TCJA, this program is set to expire after 2025.

Let’s say you have a large capital gain from the sale of a rental home that you owned, and you want to defer paying federal income tax on that gain. If you can invest those gain proceeds in a QOF, you could see tax benefits fall your way.

The gains are deferred until the earlier of December 31, 2026, or when you dispose of your QOF interest.

The tax would generally be owed at that time on the deferred gains less the tax basis in the QOF investment!

The longer you hold a QOF investment, the more tax incentives there are generally speaking. You, as an investor, would begin with a zero-tax basis.

How long you hold your QOF Investment	What happens to your basis
If you hold your QOF investment for at least 5 years	Your basis in it increases by 10% of the originally deferred gain, meaning that 10% of the deferred gain can go permanently untaxed.
If you hold your QOF investment for at least 7 years,	Your tax basis in it is further increased by 5% of the gain that was originally deferred.
If you hold your QOF investment for 10 years or more	You can then elect to increase your basis to fair market value at the time you sell the investment, so that post-acquisition appreciation in the QOF isn’t taxed when the interest is sold.

Note: the deferred gain from your real estate sale will be taxed in 2026 unless updated legislation says otherwise.

You have 180 days from selling your real estate to invest the proceeds in a QOF. You can invest all of your short-term or long-term capital gain proceeds from the sale or just part of the gains. However, if you invest part of the gains, only that portion of the gains contributed to the QOF qualifies for deferral.

If you decide to go the QOF route, “you must elect” the tax deferral on your tax return for the year of the sale. Be sure to follow the instructions on Form 8949 for electing deferral and reporting the deferred gain and be sure to submit Form 8949 with your return.

Also, you’ll have to complete and attach Form 8997 to your return. Form 8997 lets the IRS know of the Qualified Opportunity Fund investment and the amount of gain deferred, among other information.

Conclusion

Whether art, antique vehicles, stocks, bonds, real estate, crypto or many other items that are sold for a gain–capital gains taxes may very well apply, and you want to know the likely amount that you will have to pay prior to the transaction (sale of assets) or before taxes will be due–not after.

When it comes to your personal finances, whether you require a tune-up or major overhaul, your awareness of capital gains at the earliest time possible will serve you well throughout your wealth building journey.

By having that awareness you will put yourself in position to know what to expect tax wise and you can plan for and take the amount that you will likely pay in taxes into the decision-making process and better determine if selling is your best option, or selling in a different manner, finding other ways to get the funds you need, doing a like-kind exchange when applicable or not selling at all–is your “best” option.

You can also reduce your capital gains after you transition by maximizing the gift tax guidelines while you are alive and participating in donor advised funds, (deduction can help reduce your overall taxes), charitable trusts and other estate planning options that can legally be done to reduce the size of your estate and increase what your heirs will receive and reduce what they will have to pay tax wise after your transition. Charitable trusts, including donor advised funds and others can provide tax benefits by reducing your taxable income, avoiding capital gains taxes, and removing assets from your estate. You normally need to have a sizable net worth and you will need a highly competent attorney who specializes in this area to educate and guide you in the process.

In short, by analyzing your capital gains tax potential on the front end, you put yourself in a better position to make strategic decisions that can be of more benefit to you and your family in this economic climate–or any future economic climate–or even after you transition. Also, if you are a high-income earner, be aware that an additional 3.8% NIIT or the AMT may apply to your capital gains tax payment on your tax return.

Isn’t it time you avoid short and long-term pain so that you can sincerely enjoy your capital gain!

You can now “fly high” as you pursue an unrelenting path toward capital gains and long-term wealth building success as you have NOW been kicked out of your nest and you must now fly at an altitude that is your absolute best…

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Decision Making & Wealth Building

Posted on January 25, 2025 by TheWealthIncreaser.com

Learn the importance of making good decisions in any economic environment as you build wealth…

In the current environment disinformation and misinformation are presented at such an alarming rate that many are making poor and often erroneous decisions off of that information that is leading to stagnation or impeded movement in the improvement of their finances, and hence wealth building efforts.

By not operating with factual (truthful) or the most relevant data, many make poor decisions that often puts them on the wrong track towards building wealth in an efficient manner.

In this discussion the topic of “decision making as it relates to the building of wealth” will be addressed by TheWealthIncreaser.com, as it is a topic that has been discussed over a number of years on this blog, yet many continue to make decisions that are adverse or detrimental toward their wealth building efforts.

Mindset Preparation

You must do your part when it comes to making good decisions and that begins with you preparing your mind with the right knowledge so that you will make smart or at a minimum, good decisions as you manage your finances.

You must prepare your mind with the right knowledge so that you will have the expectation that you will flourish and live abundantly while you are here on earth!

You must know that negative, self-defeating thoughts will often be brought to life by you if you constantly focus on them, however the good news is that positive uplifting thoughts that you have on a consistent basis can also be brought to life by you if they dominate your consciousness as well.

The more positive and uplifting your thoughts are, the more likely the chance that you will make good decisions and pursue your goals with more precision.

Always realize that positive energy (or enthusiasm) comes from positive focus, therefore your mental concentration on what you want to achieve is a must–and your goal is to take steps that you can trust!

Goal Preparation

It is important that you have a number of goals that you want to achieve as that can often motivate you to pursue your goals at a higher level of intensity. You want to put yourself in position to make decisions that will benefit you and your family in a more advantageous way today–and throughout your lifetime.

By setting meaningful and significant goals and making the decision to really give it your best to achieve those goals at your highest level of determination, you make those goals more likely to occur and your life on earth will be a more joyous experience.

Make the Decision to Review Because You are Sincere in Making Your Dreams Come True

You must approach your decision making with integrity and have a yearning for solutions to your finances in a comprehensive way if your goal is to make better decisions for more than just a day!

By diligently pursuing your goals, making adjustments when you fall short and having the wherewithal to press on when adversity occurs, you are making decisions that will help ensure a more prosperous future for you and your family.

When you make the decision to see your financial future from a “big picture” perspective and when you decide to lay it all on the line in a comprehensive manner by conceptually understanding and having the ability to apply that understanding for your and your family’s greater benefit, you will see the full layout (blueprint of the success that you will achieve) with more clarity and you will realize that you have been putting yourself in a better position to make “better” decisions, and the clear credit and financial focus that you need to succeed will be more likely to come into focus.

Conclusion

Your ability to make good decisions in the current economy will not only put a smile on your face and put more money in your safe but will serve you well in your future in ways that may be inconceivable by you at this time.

As you build wealth in a serious and committed way, you cannot let disinformation, misinformation, rhetoric and bad advice that is now occurring at a rapid, and often insurmountable rate at times, lead you to make less than ideal decisions as you build wealth!

Even though misinformation and disinformation appear to be here to stay for the foreseeable future, you don’t have to let that information lead you to use your own brain to your own detriment. Quite the contrary, you must make the decision to analyze what comes across your mind and heart in a careful, analytical, accurate and critical manner to prevent bad things from happening to you and make good things more likely to happen for you!

Propaganda, alternative facts, opinions, rhetoric, unverified source(s), figure of speech, falsehoods, lies, literally, figuratively, tone implication, artificial intelligence, misinformation, disinformation and the like–or regardless of the name that bad information goes by that is not the truth or factually based is not going to serve your greater benefit–when interpreted improperly! Therefore, what is presented to you in all forms must be properly analyzed and understood by your mind and heart for what it truly is, so that you will make at a minimum a good or at best, “the best decision possible” (pun intended) “prior to” and not after entering into a transaction or making critical decisions in all facets of your life.

In the times that we now live in the interpretation of the truth is in many cases subjective, however in actuality the truth is the truth in absolute terms as there can only be truth–and nothing else!

Therefore it is imperative that you use discernment along with your analytical skills to understand how what is being pitched at you locally, nationally and globally impacts you–and choose or decide the best path that you should take as you proceed in your wealth building efforts based on sound analysis, your life experiences and what is truly being said, asked, or suggested–whether subliminally or at a conscious level so that you can achieve more for yourself and your family.

Are you analyzing what is being presented to you and actually “challenging the information” or are you accepting what is presented, or are others challenging the material on your behalf due to your inability or mental laziness to challenge the information yourself?

Does what is being communicated to you appear to be logical on the surface?

Does the premise of the argument or statement support the conclusion?

What is the part of the variable (or argument) that you can’t see but needs to be analyzed anyway?

The effective use of your mind is not just hyperbole but is something that you must do with increased effort on a consistent basis, if you desire to build wealth efficiently!

Are you asking the right questions in order to get the right or best answer possible for “your” financial situation?

Furthermore, you must use the skills that you now have or will soon possess to analyze this site and others sites–along with all that your mind encounters, whether in verbal or written form, to decipher what is being said generally and use what is being said precisely to move forward decisively in a way that is more advantageous for what you want to see come true–and not more to the benefit of the one(s) doing the communications to or toward you!

It is also important that you recognize that you don’t know what you don’t know on various subject matters, and more research or seeking of professionals and others who possess more knowledge on the subject matter may be needed. It is important that you realize that what you think you know may not be correct or totally correct as we all have blind spots and can’t see or know everything.

Therefore, you must have a yearning to learn more on various topics so that you can make better decisions in the future if you are one who desire to achieve more at this time, and particularly as it relates to the building of wealth!

It is very important that throughout your life you don’t let others ( friends and family, financial professionals, attorneys, lenders of various types, credit card issuers etcetera) use what they do and know to influence you disadvantageously without you even knowing it, and subsequently getting you to use your own brain against your own best interest (by letting ads, artificial intelligence, marketing techniques, celebrities, athletes, entertainers, influencer’s, what appears hot at the moment, and in many cases superior informational knowledge that others possess and you don’t, adversely influence you) when you are in the process of managing your credit and finances or any other area of your life in which you desire to see advancement!

By learning how you can make better decisions on the front-end you are putting yourself and your family in a better position for success in the short, intermediate and long-term.

It is important that you ask the right questions and seek the right answers as your goal is to “move the needle in the direction that favors you” as you build wealth, and if you fail to do so or do so half-heartedly–you make your wealth building goals more difficult to achieve.

By making better decisions you can position yourself and your family for a lifetime of success where the decisions that you make will carry more weight, and your family can look to you with more confidence to help them make a breakthrough as they later take steps toward making their dreams come true.

In conclusion, you want to have a “made up mind” that you will make the best or at a minimum good decision(s) based on your current knowledge base and the knowledge that you will later gain–and you must know that you are fully equipped to pass any test or adversity that comes your way, because you have a real understanding of your future success that you are pursuing and you know that your determination level and focus will not sway!

Whether those who push ideas, promotions and offers at you conflate or obfuscate, you want to put yourself in position to make decisions that are great so you won’t have to lift as much weight! When something doesn’t feel or sound right to you–that could be your intuition telling you to hold off on the decision and do further research.

Isn’t it time that you do something for not only your benefit but also for the benefit of humanity “and” the glory of God so that you can advance and not hinder society during your epoch on planet earth? Isn’t it time that you improve both your self-worth and net worth and achieve goals that you have been pursuing since your birth?

All the best as you make better decisions that can lead to lasting success as you give it your absolute best…

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3 Steps to Wealth Building Success

Posted on January 9, 2025 by TheWealthIncreaser.com

Learn how you can take “3 steps” to achieve more as you build wealth…

As the year 2025 starts to come alive, you want to proactively put yourself and your family in position to thrive.

In this brief and to-the-point discussion TheWealthIncreaser.com will discuss ways that you can start and finish 2025 and beyond in winning fashion.

And with this being the “4th year since the homegoing” (January 9th, 2021) of the one who brought the creator of TheWealthIncreaser.com into the world, and this date (January 9th, 2025) also being the date that former President James Earl (Jimmy) Carter is being laid to rest in his homegoing service, this discussion takes on more meaning than most–as this discussion has been given even deeper thought than almost any other post.

It is imperative that you too give deeper thought to your future so that you can start or continue on a more serious path toward the wealth building success that you desire or deserve!

On the ground floor, or the fist level of your 3-story house (pun intended) is the building of your foundation, and that includes understanding your need to create a budget or cash flow statement, create an income statement, create a balance sheet and knowing your net worth at this time.

On level 2 or the second floor, is your mastery of your credit and how you effectively apply that mastery to your advantage throughout your lifetime.

On level 3 or the top floor is where you lay it all on the line in a comprehensive manner by conceptually understanding and having the ability to apply that understanding for your and your family’s greater benefit by seeing the full layout (blueprint of the success that you will achieve) as you are in position to have an unobstructed view of your future.

In the paragraphs that follow you will learn how you can “slow walk” or “run” (your choice) through all levels (learn at your own pace) and achieve more throughout your lifetime so that you can not only see success–you will know in definite terms what you need to do to make your dreams come true.

Level 1 or building of your foundation

It is very important that your foundation of wealth building is as sound as possible, as without a solid foundation the true building of wealth will not be sustainable–in the same manner as a house built on a faulty foundation will not sustain.

By knowing your true personal finance position at the earliest time possible, you set yourself and your family up for a more successful future at the various stages of your life.

Level 2 or mastery of your credit

Knowing your inflow and outflow of cash and how you effectively manage that flow is very important, but so too is knowing how to manage your credit effectively on a consistent basis–as there is a high correlation!

You must know how to use the 5 credit factors to your benefit throughout your lifetime. By knowing the 5 credit factors, the three major credit bureaus, and the FICO and Vantagescore scoring models, you can set yourself and your family up for a lifetime of credit success if you use the knowledge gained in an appropriate manner.

Level 3 or comprehensively understanding your finances

An overall or comprehensive overview of your finances is in almost all cases far superior to having a piecemeal or isolated understanding of your finances.

By knowing that you must “effectively” address (and you actually do so) your insurance, investments, taxes, emergency fund, education planning, estate planning/wills and retirement planning–you are ensuring a more prosperous future for yourself and your family and you are looking at your future from a more advantageous point of view, in large part because you decided to approach your finances in a manner that is best for you, because you are sincere about making your dreams come true.

Conclusion

Your understanding of the three steps mentioned above can help you climb higher as you build wealth and more efficiently direct you towards the goals that you desire because you will have a better view! As 2025 progresses, you want to know in clear terms the steps that you can take to achieve your goals in a more efficient manner because you know that your future is at stake.

Isn’t it time you beat, defeat, and treat what ails you financially in a more astute way–today so that the actions that you take will have the final say?

By implementing the 3 steps above in a sincere manner, you can start or continue on a path to achieving your goals in a more efficient manner. You no longer have to approach your finances in an unsure manner or let anxiety dominate your mental space–as you can now approach your wealth building future with more grace and move about at your own pace.

Imagine solution(s) for yourself and others and then bring the solution(s) into existence, just as the creator of TheWealthIncreaser.com has done–in large part by dreaming big and following up on that big dream with consistent action that has led to succeeding in a big way when it comes to helping others throughout the world build wealth in ways they never imagined!

Always remember that when your goals and objectives (especially when they are in writing) are aligned with your thoughts–your wealth building success occurs at a faster pace in almost all circumstances!

Did you know that God is transforming the gift in you in 2025 so that you can transform the gift in others at some time in their future?

Your gift must be put into action by you and used to uplift others!

Your gift is not meant to be harvested by only you, but is meant to serve the glory of God and help you and others achieve goals that are not odd.

Gear your mind up for consistent action in 2025 and always keep your most pressing dreams alive, because now is the time that you arrive and do more than just survive–because you are now on a path that puts you in position to thrive!

Isn’t it also time you learn and utilize a finance improvement system that makes sense? Isn’t it time you achieve at a level that is your best, and reach a higher level of excellence?

It is very important that throughout your life you don’t let others ( friends and family, financial professionals, attorneys, lenders of various types, credit card issuers etcetera) use what they do and know to influence you disadvantageously without you even knowing it, and subsequently getting you to use your own brain against your own best interest (by letting ads, artificial intelligence, marketing techniques, celebrities, athletes, entertainers, influencer’s, what appears hot at the moment, and in many cases what appears on the surface to be superior informational knowledge that others possess and you don’t, adversely influence you) when you are in the process of managing your credit and finances or any other facet of your life!

Creditors and other financial professionals always expect success because they know that their bottom line will be negatively affected if they don’t succeed!

You too must expect success and know that you will succeed when it comes to building wealth because you have the right approach, an expectation of success, and a level of determination that is beyond reproach–because you understand fully that your and your family’s bottom line will be affected if you don’t get your lack of understanding of your finances corrected and use the knowledge gained in a more advantageous way for you and your family–not others!

All the best to your joyous new year, and continued wealth building success–as your journey toward excellence is in your hands as long as you don’t procrastinate and remain in the stands.

Get off the sidelines and out of the stands now!

The 3 Step Structured Approach will show you how…

NOTE: As the creator of TheWealthIncreaser.com and someone who has over 20 years of experience in the personal finance industry, I know of no other system that provides YOU a comprehensive understanding of your finances that “you can control and use for your benefit” throughout your lifetime, than that of “the 3 Step Approach” that you now have the opportunity to utilize at this time for the greater benefit of yourself, your family, your loved ones and society at-large–now and even after you transition.

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Insecurity & Wealth Building

Posted on December 22, 2024 by TheWealthIncreaser.com

Learn why failure is not an option as you arrive in 2025 when it comes to building wealth and improving your health….

If you fail at taking control of your life and pursuing your wealth building efforts at a higher level of intensity, it can lead to dire consequences, including depression later in your life. Financial stress is a leading cause of depression in the lives of many, however you don’t have to be included in the “many” if you determine at this time that you desire more in your life and you are willing to put forth the required effort.

It is important that you don’t FAIL in your efforts to address Fear, Anxiety, Insecurity and Loneliness in your life, if any or all of those factors are now a part of your life and are at an unhealthy level at this time.

And with this day (December 22nd, 2024) being the 4th year since the transition of the one who brought the creator of TheWealthIncreaser.com into this universe, it is more important than ever that you not only enjoy the holiday season, but you do your best to make a successful 2025 and beyond possible by doing what you need to do, just as other visitors to this site are–and have done!

In this brief discussion the TheWealthIncreaser.com will try to end 2024 and bring in 2025 on an upbeat note, as many are now feeling insecure in many ways about what lies ahead in their future.

It is important that you control what is in your sphere, or control matters that are definitely under your control as you can reduce the insecurity that you may have in a more definite manner and achieve at a higher level in the coming years.

The above factors have caused pain and misfortune for many because they failed to approach their future with the proper focus and mental tools that were necessary to achieve optimally and use the available tools appropriately on a more consistent basis.

By letting fear and anxiety control you, and having an insecure feeling about your future it can possibly lead to loneliness and depression if not managed appropriately!

In this discussion TheWealthIncreaser.com will focus on ways that you can manage your finances and life at a higher level of excellence so that you and your family can prosper in 2025 and beyond.

Potential

You must use the potential that you have at this time to manage your time, money, and stress in a more beneficial manner and in a manner that gives the edge to you and your family–not others. It is important that your mind dwells in places where all things are possible.

Capacity

You have the capacity to manage your credit and finances in a more intelligent, consistent, and proactive manner by gaining the preparation and knowledge that you need to succeed at this time–not “after” you make costly mistakes.

Purpose

By leaving Fear—Anxiety—Insecurity–and—Loneliness in the rear, you can put yourself in position to live a more abundant life and you can get to a point where you can sincerely pursue your life purpose or what you were truly put on earth to do. By pursuing your goals in a systematic way that works with your mind you can outsmart systems that may be working against you and “not” FAIL in your wealth building efforts or any facet of your life.

Conclusion

You have the potential and capacity to do more during your lifetime and now is the time that you tap into your mind and contemplate your future at a higher level and truly reach your life purpose or what you were sincerely put on earth to do.

If you FAIL to take action now, it could lead to added stress, possibly depression and you living out your life in despair because you failed to strive to pursue your goals at your highest level of excellence while you were of sound mind! Why look back in regret when you at this time can make a sure bet?

You can now “alter your mind” using “PCP” in a good way by:

tapping into your full potential,

utilizing what you are capable of doing for your and your family’s greater benefit, and

pursuing your life purpose at your highest level of excellence.

You must realize at the earliest time possible that it is your responsibility to direct your life in a responsible manner and in a manner where the goals that you desire most will truly have a chance to materialize during your lifetime–starting in the year 2025 and throughout the years that you are alive.

It is important that you make a real commitment at this time to pursue the success that is already yours, if you believe it to be true and you respond to adversity by doing what you need or desire to do! From this day forward you must “know” that you are on an unrelenting path toward success–and FAILure is not an option!

And just as the creator of TheWealthIncreaser.com gained the preparation and knowledge over a number of years and has used “to whom much is given, much is required” and “be fruitful and multiply” to spread wealth building principles to those who desire real and lasting success to all 4 corners of the earth—so too can you use your imagination to make great things happen for yourself and others–whether it be financial or otherwise.

Odds are you are on this blog because you desire a real path to wealth building success or you were referred by someone who desire that you get on a real path to success. SEO optimization and marketing gimmicks are intentionally not a feature of this site as the goal of this site is for you to attain the success that you desire in an intelligent, consistent, and proactive manner–where you control your outcomes and the goals that you desire most are achieved in real-time.

If you at this time desire to pursue a more definite path toward success you must be fully committed! If you are not fully committed, you may become irritated, frustrated and feel on the inside that you can’t achieve what you need to achieve, therefore it is important that you fully believe, and you are determined to reach higher at this time!

If you are not ready to pursue a more lasting path toward wealth building success, you want to at least be true to yourself and say no to your mind and heart, so that you won’t waste energy pursuing that which you are not fully committed to doing at this time.

Always realize that if you possess the right knowledge (or are sincerely willing to learn) you can make moves and countermoves that can keep you on a path to success or reposition you for success–regardless of what lies ahead!

Insecurity or an uneasy feeling about the future lies inside all of us, however you don’t want to have the feeling of insecurity at an unhealthy level. You must know in certain terms that your future is bright and the JOY that is available to you will be tapped into and enjoyed by you, as you can now see the light.

The False Evidence Appearing Real will no longer play a meaningful role in your life because as a result of visiting this blog, you have left fear, anxiety, insecurity, and loneliness in the rear–as you are now on a new grind as you unwind–and leave all failure behind!

By taking the steps outlined, you can put yourself in position to enjoy a more secure future–in large part because YOU made the decision to control your actions now to help ensure a brighter future for yourself and your family.

You can further reduce the insecurity that you may have by “knowing common credit mistakes to avoid” so that financial trouble doesn’t land in your neighborhood–like an asteroid!

Isn’t it time you use your creativity and inspiration and go from that which was not–to that which is?

I leave you with a poem as a tribute to the one who brought the creator of TheWealthIncreaser.com into this world and as inspiration to help you reach higher as you pursue the goals that you desire:

All the Glory Belongs to God