Tax-loss harvesting is often bandied as a no-lose way to reduce taxes. Unfortunately, there are many pitfalls and under certain circumstances could actually increase your tax liability. Paying a service like Betterment to increase harvested losses only really works in a few limited situations.
The Tax Cuts and Jobs Act of 2017 brought several new opportunities to reduce your tax burden. A few previous options have been reduced or eliminated. First the bad news.
Like-kind exchanges are now limited to real estate. Capital gains in real estate can be deferred into a replacement property if complicated tax rules are followed. The same cannot be said for business property any more.
The good news comes to us in what is known as §1400Z-2 and §1016(a)(38) as added or modified by the Act. This might sound like a mouthful, but once you understand the implications your mouth is sure to start salivating. In a language normal people understand this means ALL capital gains can be deferred with some gains even tax-free at some point. It also means future gains (for a limited time only as we’ll discuss shortly) can be completely tax-free!
Your favorite accountant has received multiple requests to cover these new Opportunity Funds and Zones in detail due to the conflicting and limited information published elsewhere. In this post we will dig deep into the subject, unveiling the nuances you can use to take a serious bite from your tax liability.