Capital gains tax has long been known as one of the major drawbacks of those who have made money on an investment; however, investors are finding ways to avoid these expensive taxes. Let’s look at what a few of those ways are:
Have a small income. This is surely not a favorite of the person wanting to bring in real money, but if you have brought in a small amount of money in wages along with gains from a mutual fund then you can avoid this tax. All in all, if your taxable income as a married couple falls below $65,101, or as a single filer you earn less than $32,501, then you avoid capital gains tax. So let’s say as a single person you had an income of $12,000 this year working part-time, but through investments you made gains of $20,100. Because you total taxable income is only $32,100, you avoid paying.
Make exchanges. This works with playing the market as well as buying property. If you want to avoid paying capital gains tax knowing that you will make more money through a sell than you paid then you can instead make an exchange. For example, if you’ve purchased a mutual fund and want to sell without paying shareholders expensive taxes, you can instead exchange it for a like fund to avoid the cost.
Claim a loss. If you are in the midst of disposing of a mutual fund that is losing you money then you may be able to deduct the loss from other assets you own that would possibly succumb to capital gains tax, creating a sort of balancing effect.
These are just a few of the ways that you can avoid capital gains tax with your mutual fund. So if your situation didn’t make the list but you’re serious about sidestepping this expense then it’s a good idea to continue your research. You may just find the legal loophole you’re looking for.