Go Back  The Hull Truth - Boating and Fishing Forum > BOATING FORUMS > Dockside Chat
Reload this Page >

Another Retirement Thread - Handling of Capital Gains

Notices
Like Tree2Likes

Another Retirement Thread - Handling of Capital Gains

Old 06-03-2018, 10:26 AM
  #1  
Senior Member
Thread Starter
 
Join Date: Jul 2014
Posts: 2,319
Default Another Retirement Thread - Handling of Capital Gains

Going into early retirement age with anticipation of capital gains from the sale of real estate investments.

Selling capital assets, of course you want to sell when the price is up and in a way that will net the most $, which leads to periods of little or no income combined with periods of large amounts of income. This creates issues of paying a higher tax bracket with the highest capital gain tax rate, and the AMT to boot, in the years with a lot of income.

Has anyone had success with a way to handle the capital gains in a way that will avoid the higher tax brackets such as making large irregular contributions to an IRA or some other vehicle that can managing the dispersal amounts?

Maybe should try a financial forum, but I'm not a member of any financial forums so here it is.

TIA
raystein is offline  
Old 06-03-2018, 10:31 AM
  #2  
Admirals Club Admiral's Club Member
 
Join Date: Feb 2013
Posts: 988
Default

Originally Posted by raystein View Post
Going into early retirement age with anticipation of capital gains from the sale of real estate investments.

Selling capital assets, of course you want to sell when the price is up and in a way that will net the most $, which leads to periods of little or no income combined with periods of large amounts of income. This creates issues of paying a higher tax bracket with the highest capital gain tax rate, and the AMT to boot, in the years with a lot of income.

Has anyone had success with a way to handle the capital gains in a way that will avoid the higher tax brackets such as making large irregular contributions to an IRA or some other vehicle that can managing the dispersal amounts?

Maybe should try a financial forum, but I'm not a member of any financial forums so here it is.

TIA
So generally speaking to make contributions to a retirement plan you need earned income. Cap gains don’t count. You would have to create some sort of business structure that would allow you to do this and I would think the transfer of the assets and the tax treatment of the business structure would not be worth it.

Would a 1031 exchange help you? Could you roll the gains into something short term to have more control over the taxation?
tprice likes this.
captwill_80 is online now  
Old 06-03-2018, 10:34 AM
  #3  
Admirals ClubCaptains Club Member Admiral's Club Member
 
Join Date: Oct 2002
Location: anderson, sc
Posts: 18,757
Default

Capital gains normally cheaper than regular tax rates, just make sure they are Long Term CG. ST is ordinary income

Can not contribute to IRA if you have no Earned Income


1031 can be a great deal if done correctly but basically all you doing it postponing gains not avoiding them
tprice is offline  
Old 06-03-2018, 11:08 AM
  #4  
Senior Member
 
Join Date: Dec 2015
Location: Central Florida
Posts: 1,753
Default

If you go to Bogleheads.org they are very friendly over there. I had a situation where I had to deal with a large capital gain and I wish that I had not sold the stock right then. You are right to want good advice as to how to deal with it.
Lobstercatcher229 is offline  
Old 06-03-2018, 11:17 AM
  #5  
Senior Member
Thread Starter
 
Join Date: Jul 2014
Posts: 2,319
Default

A 1031 perhaps, but all the pieces would have to fit which I would think would be unlikely. I saw some people make some terrible deals around 2007 because they were trying to force a 1031.
tprice likes this.
raystein is offline  
Old 06-03-2018, 11:17 AM
  #6  
Senior Member
Thread Starter
 
Join Date: Jul 2014
Posts: 2,319
Default

Originally Posted by Lobstercatcher229 View Post
If you go to Bogleheads.org they are very friendly over there. I had a situation where I had to deal with a large capital gain and I wish that I had not sold the stock right then. You are right to want good advice as to how to deal with it.
Will check that out
raystein is offline  
Old 06-03-2018, 11:22 AM
  #7  
Senior Member
 
Join Date: Jun 2011
Location: Folly Beach, SC
Posts: 1,807
Default

Can’t 1031 stocks. Why only sell when you are up? Harvest losses when you can, if you can. (Watch out for wash sale rules)
Trollin4Tuna is online now  
Old 06-03-2018, 11:23 AM
  #8  
Senior Member
Thread Starter
 
Join Date: Jul 2014
Posts: 2,319
Default

Yes, will all be long-term vs short-term.

Will likely continue to be some business activity with ordinary business income. May be able to play this into a Simple Plan or something to differ tax.
raystein is offline  
Old 06-03-2018, 11:23 AM
  #9  
Senior Member
 
Join Date: Jun 2011
Location: Folly Beach, SC
Posts: 1,807
Default

Also, if you donate to charity, look into changing from cash to LTCG property. Get FMV and no capital gains.
Trollin4Tuna is online now  
Old 06-03-2018, 11:39 AM
  #10  
Senior Member
 
Join Date: Feb 2002
Location: NJ & MV
Posts: 3,913
Default

You need to understand the capiital gains rules based on income brackets (not sure how/if they changed with recent tax changes) If you can move income from one year to another, you maybe able to take fairly large capital gains with very little tax consequences. If it relates to real estate, having a balloon payment or two, spreads out the gains thereby mitigating some of the tax implications.
aubv is offline  
Old 06-03-2018, 12:22 PM
  #11  
Senior Member
Thread Starter
 
Join Date: Jul 2014
Posts: 2,319
Default

Originally Posted by aubv View Post
You need to understand the capiital gains rules based on income brackets (not sure how/if they changed with recent tax changes) If you can move income from one year to another, you maybe able to take fairly large capital gains with very little tax consequences. If it relates to real estate, having a balloon payment or two, spreads out the gains thereby mitigating some of the tax implications.
This may be a very good approach
raystein is offline  
Old 06-03-2018, 12:50 PM
  #12  
Admirals ClubCaptains Club Member Admiral's Club Member
 
Join Date: Mar 2007
Location: Lighthouse Point
Posts: 5,200
Default

Originally Posted by aubv View Post
You need to understand the capiital gains rules based on income brackets (not sure how/if they changed with recent tax changes) If you can move income from one year to another, you maybe able to take fairly large capital gains with very little tax consequences. If it relates to real estate, having a balloon payment or two, spreads out the gains thereby mitigating some of the tax implications.
Depending on agi he may be able to go from 20% to 15% if I recall correct. If agi is above X? I think they are 20%.
joe.giuliano is offline  
Old 06-03-2018, 01:57 PM
  #13  
Senior Member
Thread Starter
 
Join Date: Jul 2014
Posts: 2,319
Default

"Meanwhile, long-term capital gains are taxed at one of three potential rates -- and all are much lower than the corresponding marginal tax rates. A 0% long-term capital gains tax rate applies to individuals in the two lowest (10% and 15%) marginal tax brackets. A 15% long-term capital gains tax rate applies to the next four brackets -- 25%, 28%, 33%, and 35%. Finally, a 20% long-term capital gains tax rate applies to taxpayers in the highest (39.6%) tax bracket.

It's also important to remember that certain high-income taxpayers pay an additional 3.8% net investment income tax, which kicks in above certain income thresholds."

Married Filing Jointly - AGI
<$77,400 = 0% cap gain rate
$77,400-$480,050 = 15%
>$480,050 = 20%

Of course it is all subject to change.

Trying to figure our how to capture market peaks without worrying about getting stuck with the highest rates. Typical scenario would see little or no cap gain for years and then paying same tax rates as 1%ers, then little or nothing again for a while.
raystein is offline  
Old 06-03-2018, 04:32 PM
  #14  
Admirals Club Admiral's Club Member
 
Join Date: Apr 2012
Posts: 1,510
Default

Pay your taxes and quit b1tchin about it, capital gains is taxed at 20% and there is no longer AMT.
Saltydawg15 is offline  
Old 06-03-2018, 04:40 PM
  #15  
Member
 
Join Date: Apr 2018
Posts: 54
Default

Charitable planning can greatly reduce taxes.....that is if you have a charitable inclination.....
Cjfla is offline  
Old 06-03-2018, 04:40 PM
  #16  
Senior Member
 
Join Date: Feb 2002
Location: NJ & MV
Posts: 3,913
Default

Originally Posted by Saltydawg15 View Post
Pay your taxes and quit b1tchin about it, capital gains is taxed at 20% and there is no longer AMT.
Actually in simple terms, joint filers pay 0% on long term cap gains and dividends if their ordinary income is below $77,200.
aubv is offline  
Old 06-03-2018, 04:45 PM
  #17  
Senior MemberCaptains Club Member
 
Join Date: Aug 2006
Location: Central Florida
Posts: 8,290
Default

If you are comfortable offering owner financing, you can do an installment sale, which will spread the gain/tax over the time you receive payments. The 1031 will only work if you want to continue investing in real estate. If you are charitable, you could donate appreciate property. You may also be able to set up a donor advised fund.

One piece of advice. I've seen people shy away from selling assets due to tax consequences, only to see values get hit in the future. Try to plan well, but don't taxes get in the way of your plans.
Sprockets is offline  
Old 06-04-2018, 04:37 AM
  #18  
Senior MemberCaptains Club Member
 
Join Date: Jul 2006
Location: RI
Posts: 6,578
Default

Keep in mind there may be an opportunity cost with an installment sale depending on how you were planning to deploy the net proceeds of the sale. Also, don't forget about depreciation recapture on investment real estate.

BACKTOTHESEA is online now  
Old 06-04-2018, 04:52 AM
  #19  
Senior MemberCaptains Club Member
 
Join Date: Feb 2006
Posts: 1,267
Default

I am going through a similar exercise. Most of our gains are going to cost us 20% + 3.8%. I looked at an UPREIT, where you can 1031 gains into a REIT, but it really only made sense with larger sums of money due to the complex transaction which would have some costs.
Also, even if you did exchange into an UPREIT, it limits how your principal can be accessed, and then you are locked into one REIT, not diversified across the market. For these reasons it was better for us to just pay the tax. You may look into it though, to decide if it makes any sense for your situation.
houtxfisher is offline  
Old 06-04-2018, 05:50 AM
  #20  
Admirals Club Admiral's Club Member
 
Join Date: Aug 2017
Location: WI
Posts: 257
Default

I’ve said it before in other retirement threads, but it’s worth repeating - if you have the potential tax you are insinuating, you NEED to work with a qualified tax professional. He/she could save you thousands or tens of thousands of dollars.
SouthpawHD is online now  

Thread Tools
Search this Thread