Buying or Selling a Major Asset? Start With a Tax Plan

A property purchase, investment sale, or business equipment acquisition can have a lasting effect on your finances. Before you commit, it helps to understand the tax consequences—and the options available to you.

Proactive tax planning gives you time to review ownership, timing, deductions, and potential gains before a transaction is complete. That can help you avoid surprises and make decisions with a clearer picture of what you’ll keep after taxes.

What Determines the Tax on an Asset Sale?

Your taxable gain generally depends on the amount you receive, after applicable selling costs, compared with your adjusted basis. Basis often starts with the purchase cost, but improvements, depreciation, and other adjustments can change it.

For assets subject to capital gains rules, two important factors are:

• Your holding period. Assets held for one year or less generally produce short-term gains, taxed at ordinary income rates. Assets held for more than one year generally qualify for long-term treatment.

• Your taxable income. Most net long-term capital gains are taxed at 0%, 15%, or 20%, depending on taxable income and filing status. Certain assets have different maximum rates.

Some higher-income taxpayers may also owe the 3.8% net investment income tax, depending on their modified adjusted gross income and net investment income.

Different Assets Have Different Tax Rules

Stocks, Bonds, and Investment Funds

Capital losses can generally offset capital gains. If your losses exceed your gains, individuals can generally deduct up to $3,000 of the net loss against other income annually—or $1,500 if married filing separately. Unused losses generally carry forward.

Before you sell: Review your purchase records, holding periods, and available loss carryforwards. These details can help you evaluate the tax impact of selling this year versus a later year.

Cryptocurrency and Other Digital Assets

Selling cryptocurrency, exchanging it for another digital asset, or using it to pay for goods or services can create a taxable gain or loss. Receiving digital assets as payment or rewards may also generate taxable income.

Simply buying cryptocurrency with U.S. dollars or holding it generally does not create a taxable event. Transfers between your own wallets are generally nontaxable, although digital assets used to pay transfer fees can have separate consequences.

Before you transact: Keep records of acquisition costs, dates, transaction values, and fees. Review the Form 1040 digital asset question based on your actual activity.

Your Primary Home

Eligible homeowners may exclude up to $250,000 of gain, or $500,000 for qualifying married couples filing jointly, when selling a primary residence.

The exclusion generally requires meeting ownership and use tests for at least two of the five years before the sale. Additional requirements apply, including limits on how frequently you can claim the exclusion. Rental or business use can complicate the calculation.

Before you list: Gather purchase documents, improvement receipts, and any rental or business-use records. Confirm your eligibility before assuming the entire gain will be excluded.

Rental Properties

Selling a rental property involves more than comparing its purchase and sale prices. Depreciation reduces adjusted basis and can increase the taxable gain.

For many depreciated rental buildings, the portion of gain attributable to depreciation may be taxed at a maximum federal rate of 25% under the unrecaptured Section 1250 gain rules. Other portions of the sale may receive different treatment.

Before you sell: Have your tax professional review depreciation schedules, improvements, suspended losses, and estimated tax obligations. Understanding the projected tax bill can help you plan how much of the proceeds will remain available.

Collectibles

Long-term gains from certain collectibles, including art, antiques, and coins, can be taxed at a maximum federal rate of 28%. That is a maximum rate, rather than a flat rate that applies to every sale.

Before you sell: Gather records supporting your cost, acquisition date, and selling expenses so the gain can be calculated accurately.

Plan the Purchase, Too

Tax planning also matters when acquiring an asset. For business equipment or investment property, review the intended use, ownership arrangement, financing, and potential depreciation treatment before completing the purchase.

The purchase should fit your cash flow and long-term goals. Understanding the tax treatment helps you evaluate the full cost rather than relying on a potential deduction alone.

Review Your Options Before the Transaction Is Final

Once a purchase or sale is complete, some planning opportunities may no longer be available. An earlier review gives you time to compare options, organize records, and prepare for any tax payments.

At Cohn, Lopez & Associates, we provide proactive tax planning for individuals and businesses, helping you understand how major financial decisions affect your broader tax picture. Located in Winter Park, we offer in-person and virtual appointments.

Let’s review your next purchase or sale before you commit.

Call 407-960-3652 or schedule an appointment.