Tax Planning Tips for Your Investment Portfolio

A successful investment can help you build wealth—but the tax consequences can affect how much of that growth you keep.

Before selling shares, making a charitable gift, or transferring assets to family, consider how the decision fits into your broader tax and retirement plan. Proactive tax planning can help you compare options while you still have time to act.

Here are five opportunities to review.

1. Choose Which Shares You Sell

If you purchased the same stock at different times, each group of shares may have a different cost basis and holding period. Choosing specific shares can change the taxable gain or loss from a sale.

Selling higher-basis shares may reduce your gain, but holding periods also matter. A smaller short-term gain does not always produce a lower tax bill than a larger long-term gain.

What you can do: Review your available shares before placing the trade. Tell your broker which shares to sell at the time of the transaction and obtain written confirmation. Keep purchase records, particularly for older investments or shares transferred between brokerage accounts. Missing basis on Form 1099-B does not automatically mean your basis is zero.

2. Plan Ahead Before Selling a Successful Investment

An investment that has grown substantially may create a significant taxable gain when sold. If you have flexibility, selling portions across multiple tax years may help you manage the tax impact.

Available capital losses may also offset gains. If charitable giving is already part of your plan, donating appreciated shares directly to a qualified charity may offer another opportunity.

What you can do: Compare the projected results of selling now, spreading sales over time, or donating selected shares. Eligible appreciated securities held for more than one year may qualify for a fair-market-value charitable deduction, subject to applicable limits and requirements. Arrange the donation before selling the shares.

Consider investment risk and diversification alongside potential tax savings.

3. Account for the Net Investment Income Tax

A large investment gain can trigger an additional 3.8% Net Investment Income Tax, or NIIT.

For individuals, this tax applies to the lesser of net investment income or the amount modified adjusted gross income exceeds the applicable threshold:

• $200,000: Single or head of household.

• $250,000: Married filing jointly or qualifying surviving spouse.

• $125,000: Married filing separately.

What you can do: Estimate your full-year income before making a major sale. Include wages, business income, retirement distributions, and other investment activity. Selling during a lower-income year or spreading sales across years may reduce exposure, depending on your circumstances.

4. Include State Taxes in Your Calculations

Federal taxes are only part of the picture. Your residency and the applicable state rules can affect the overall cost of an investment sale.

What you can do: Ask your tax professional to estimate both federal and applicable state taxes before a large transaction. If you’re moving between states, review residency dates and sourcing rules before assuming the move changes how a gain will be taxed.

Build the projected tax payments into your cash-flow plan so you know how much of the proceeds remains available.

5. Consider Cost Basis When Transferring Wealth

Two assets with the same market value can have different tax consequences for your family.

For example, appreciated stock given during your lifetime generally carries your adjusted basis for determining a future gain. Inherited stock generally receives a basis adjustment to its fair market value at death, subject to exceptions. That adjustment can increase or decrease basis.

What you can do: Review which assets to give during your lifetime and which to retain as part of your estate plan. Consider your family’s current needs, potential capital gains, gift and estate tax implications, and your own financial security.

Coordinate these decisions with your tax professional, financial advisor, and estate planning attorney.

Bring Your Investment and Tax Plans Together

Investment decisions work best when they support your income needs, retirement goals, and long-term financial priorities. Reviewing the tax consequences before acting can help you avoid surprises and make informed choices.

At Cohn, Lopez & Associates, we provide proactive tax planning for individuals and businesses, with financial and retirement planning services to support your goals. Located in Winter Park, we offer in-person and virtual appointments.

Let’s review your investment plans and identify tax planning opportunities before your next transaction.

Call 407-960-3652 or schedule an appointment.