--- title: "Capital Gains Strategies: Taking Charge Of Your Gains" description: Most investors are likely aware that geopolitical turmoil exerts its toll on the markets and, in turn, on their investment portfolio. image: https://www.realized1031.com/hubfs/Images/photo/people/business/investing-gains-optimized-istock.jpg --- [![Realized 1031 Exchange Marketplace](https://www.realized1031.com/hs-fs/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black.png?width=240&height=80&name=Realized-Logo-Black.png "Realized 1031 Logo") ](https://www.realized1031.com/) - [Wealth Management Gap](https://www.realized1031.com/the-wealth-management-gap) - [Our Process](https://www.realized1031.com/how-realized-works) - [Financial Advisors](https://www.realized1031.com/advisor) - [Resources](https://www.realized1031.com/resources) - [The Company](https://www.realized1031.com/about-us) - [Articles](https://www.realized1031.com/blog) [Register](https://www.realized1031.com/marketplace) [Log In](https://www.realized1031.com/login) - Better Business Bureau Rating: **A+** - [FINRA BrokerCheck](https://brokercheck.finra.org/firm/summary/22333) - [Call](tel:1-877-797-1031) **(877) 797-1031** # Capital Gains Strategies: Taking Charge Of Your Gains Posted Aug 13, 2018 ![Investing in QOZ](https://www.realized1031.com/hs-fs/hubfs/Images/photo/people/business/investing-gains-optimized-istock.jpg?width=800&name=investing-gains-optimized-istock.jpg) Most investors are likely aware that geopolitical turmoil exerts its toll on the markets and, in turn, on their investment portfolio. A massive crisis is not even necessary to impact someone’s portfolio value.  Market volatility is something every stock and bond investor has to learn to endure. ### How Not Having a Capital Gains Strategy Can Hurt You A capital gain is the difference between an asset’s adjusted basis and its current value. If an asset’s value appreciates, it will have an “unrealized” gain. Unrealized means the profit exists on paper that has yet to be sold for cash. A gain only becomes realized once the asset is closed for profit. If an investor decides they want to sell a portion of their investment portfolio to avoid the market’s gyrations, they must take serious consideration in the risk coming with that sale and the tax on their capital gains. For example, assume the investor’s adjusted basis is $1 million, this would mean the value of their portfolio sold appreciated to $2 million during their hold time and when they sell that portion, their profit will be $1 million. This is the current $2 million value, less the $1 million basis. However, the investor does not walk away with that $1 million. Rather, the profit will be taxed at a rate of 23.8%1, assuming their state doesn’t level a capital gains tax. The potential result is that they would owe the Internal Revenue Service (IRS) $238,000. While the remaining $1.762 million is still a tidy sum, it would be more beneficial for the investor to hold the tax money, rather than immediately handing it over to the government. ### Minimizing or Eliminating Capital Gains Tax There are options when it comes to minimizing or eliminating your capital gains tax. For example: - Donate your investment to a charity and avoid paying taxes. - “Harvest” losses in your investment portfolio to offset the gains.     - Leave it to your heirs. They receive a step-up in basis to fair-market value, meaning no taxes are owed on any gain2. - Invest your gains into a [Qualified Opportunity Fund](https://www.realized1031.com/glossary/qualified-opportunity-zone-fund-or-qualified-opportunity-fund-qof).  This exciting option became available on Jan. 1, 2018. While giving you some powerful tax advantages on your capital gain liability, it also allows you to do good in the community. ### The Benefits of a Qualified Opportunity Fund As previously discussed, the [Qualified Opportunity Zones Program](https://www.realized1031.com/glossary/qualified-opportunity-zone-program), in which investors can place capital gains from an asset sale into federally designated [Qualified Opportunity Zones (QOZs)](https://www.realized1031.com/opportunity-zones) through investment in certified Qualified Opportunity Funds (QOFs). These investment help build up a lower-income area, while deferring capital gain taxes until Dec. 31, 2026.  Additionally, the longer one holds that QOF, the fewer taxes one could owe. For example: - A five-year hold gives you a 10% step-up in basis on your original deferred gain. - A seven-year hold gives you an additional 5% step-up in basis on your original deferred gain. - An investment held for 10 years or more means you owe NO capital gains taxes on any appreciation that occurs within the fund once it is liquidated. The chart below compares the above-mentioned $1 million gain from the sale in a Qualified Opportunity Fund, versus investing the after-capital-gains tax amount of $762,000.3  [![Assumptions, Tax Inputs, and Values](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/charts-graphs/article-6080824686-table-data.jpg?width=926&name=article-6080824686-table-data.jpg)](https://www.realized1031.com/hubfs/Images/UI/graphics/charts-graphs/article-6080824686-table-data.jpg)   Other Assumptions: Taxpayer is married filing jointly with ordinary income of $500,000 (35% federal tax bracket). Each opposing investment is assumed to have the same return on investment (7.5%), and same annual appreciation (5.0%). Liquidation values are assumed to be added to pre-tax cash flow in 2028. After-tax earnings exclude negative cash-flow from initial investment in 2018. [![Pre-Tax Gains and After-Tax Proceeds](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/charts-graphs/article-6080824686-pre-and-after-tax.jpg?width=800&name=article-6080824686-pre-and-after-tax.jpg)](https://www.realized1031.com/hubfs/Images/UI/graphics/charts-graphs/article-6080824686-pre-and-after-tax.jpg) * Deferred capital gains tax realized on QOF investment - includes 15% step-up in basis. Includes ordinary income tax on $75,000 of investment income earned.   All other assumptions being equal, the investor could earn incremental after-tax earnings of $415,456 -- in other words, a 27.7% increase in total cash earned over a 10-year period, simply by deciding to invest their capital gains into a Qualified Opportunity Fund, versus a non-QOF investment vehicle.   1. *For the purposes of this example, the taxpayer is married filing jointly with income in excess of $488,500, and is assumed to have held the investment for more than one year. This rate assumes no other deductions have been taken, and only considers the long-term federal capital gains rate (20%) and medicare surtax (3.8%).* 2. *Assuming your total estate is under estate tax exemption limits.* 3. *This is a simplified hypothetical example. Actual tax savings may vary as they depend upon your tax rate, limits on deductions, impacts to your alternative minimum tax, and any other tax related items specific to an investor.* Download The Capital Gains Tax Calculator [![Cap Gains Calculator For Investors](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/laptop-capital-gains-calculator-spreadsheet.jpg?width=500&height=290&name=laptop-capital-gains-calculator-spreadsheet.jpg "Estimate the cap gains tax owed ...") ](https://www.realized1031.com/blog/capital-gains-strategies-taking-charge-of-your-gains#blogform) Download Calculator ---   --- ### Cap Gains Calculator For Investors ![Download The Capital Gains Tax Calculator](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/laptop-capital-gains-calculator-spreadsheet.jpg?width=500&height=290&name=laptop-capital-gains-calculator-spreadsheet.jpg) Estimate the cap gains tax owed after selling an asset or property By providing your email and phone number, you are opting to receive communications from Realized. If you receive a text message and choose to stop receiving further messages, reply STOP to immediately unsubscribe. Msg & Data rates may apply. To manage receiving emails from Realized visit the Manage Preferences link in any email received. Search ### [Why Realized](https://www.realized1031.com/why-realized) - [Wealth Management](https://www.realized1031.com/the-wealth-management-gap) - [Why Realized](https://www.realized1031.com/why-realized) - [Our Process](https://www.realized1031.com/how-realized-works) - [Scenarios](https://www.realized1031.com/scenarios) - [Private Client Program](https://www.realized1031.com/private-client) - [Realized Exchange Services](https://www.realized1031.com/realized-exchange-services) ### [The Company](https://www.realized1031.com/about-us) - [The Team](https://www.realized1031.com/about-us) - [FAQ](https://www.realized1031.com/frequently-asked-questions) - [Testimonials](https://www.realized1031.com/testimonials) - [Press](https://www.realized1031.com/press) - [Careers](https://www.realized1031.com/careers) ### [Partners](https://www.realized1031.com/partners) - [Financial Advisors](https://www.realized1031.com/advisor) - [Broker Dealers](https://www.realized1031.com/partners/broker-dealers) - [Real Estate Agents](https://www.realized1031.com/partners/real-estate-agents) - [Certified Public Accountants](https://www.realized1031.com/partners/certified-public-accountants) ### [Resources](https://www.realized1031.com/resources) - #### Learn - [Articles](https://www.realized1031.com/blog) - [Glossary of Terms](https://www.realized1031.com/glossary) - [Capital Gains Tax Rates](https://www.realized1031.com/capital-gains-tax-rate) - #### Watch - [Video Library](https://www.realized1031.com/videos) - [Webinar Archive](https://www.realized1031.com/webinars) - #### Read - [Delaware Statutory Trust](https://www.realized1031.com/delaware-statutory-trust) - [Tenants-In-Common](https://www.realized1031.com/tenants-in-common-tic) - [1031 Exchange](https://www.realized1031.com/1031-exchange) - [Qualified Intermediary](https://www.realized1031.com/qualified-intermediary) - [Qualified Opportunity Zones](https://www.realized1031.com/opportunity-zones) #### Realized - 500 W 13th Street Austin, TX 78701 - (877) 797-1031 ##### [Contact Us](https://www.realized1031.com/contact-us) - [![Realized on Facebook](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-facebook-whiterev.png?width=60&height=60&name=social-facebook-whiterev.png)](https://www.facebook.com/Realized/) - [![Realized on LinkedIn](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-linkedin-whiterev.png?width=60&height=60&name=social-linkedin-whiterev.png)](https://www.linkedin.com/company/realized/) - [![Realized on YouTube](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-youtube-whiterev.png?width=60&height=60&name=social-youtube-whiterev.png)](https://www.youtube.com/c/Realized1031?sub_confirmation=1) - [![Realized Holdings, Inc. BBB Business Review](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/bbb/RZH2-bbb-seal.png?width=40&height=65&name=RZH2-bbb-seal.png)](http://www.bbb.org/central-texas/business-reviews/real-estate-investors/realized-holdings-llc-in-austin-tx-1000112948/#bbbonlineclick) - [![FEA Logo](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/fea/RZH2-fea-logo.png?width=82&height=65&name=RZH2-fea-logo.png "FEA Logo")](https://www.1031.org) SECURITIES DISCLOSURE Realized1031.com is a website operated by Realized Technologies, LLC, a wholly owned subsidiary of Realized Holdings, Inc. (“Realized Holdings”). Securities and/or Investment Advisory Services may be offered through Registered Representatives or Investment Advisor Representatives of Realized Financial, Inc. ("Realized"), a broker/dealer, member [FINRA](https://www.finra.org)/[SIPC](https://www.sipc.org/), and registered investment adviser. Realized is a subsidiary of Realized Holdings, Inc. ("Realized Holdings"). Check the background of this firm on [FINRA's BrokerCheck](https://brokercheck.finra.org/firm/summary/22333). Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment. Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Alternative investments are often sold by prospectus that discloses all risks, fees, and expenses. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing. Alternative investments have higher fees than traditional investments and they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain and should not be deemed a complete investment program. The value of the investment may fall as well as rise and investors may get back less than they invested. This site is published for residents of the United States who are accredited investors only. Registered Representatives and Investment Advisor Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all of services referenced on this site are available in every state and through every representative listed. For additional information, please contact the Realized Compliance department at 512-472-7171 or info@realized1031.com. - [Terms & Conditions](https://www.realized1031.com/terms-and-conditions) - [Privacy Policy](https://www.realized1031.com/privacy-policy) - [Form CRS](https://www.realized1031.com/hubfs/common-files/disclosures/FormCRS.pdf) - [ADV 2A](https://www.realized1031.com/hubfs/common-files/disclosures/ADV2A.pdf) - [Reg BI Disclosures](https://www.realized1031.com/hubfs/common-files/disclosures/RegBI.pdf) -   © 2026 Realized Holdings, Inc. ```json { "@context" : "http://schema.org/", "@type" : "BlogPosting", "articleBody" : "Most investors are likely aware that geopolitical turmoil exerts its toll on the markets and, in turn, on their investment portfolio. A massive crisis is not even necessary to impact someone’s portfolio value. Market volatility is something every stock and bond investor has to learn to endure. How Not Having a Capital Gains Strategy Can Hurt You A capital gain is the difference between an asset’s adjusted basis and its current value. If an asset’s value appreciates, it will have an “unrealized” gain. Unrealized means the profit exists on paper that has yet to be sold for cash. A gain only becomes realized once the asset is closed for profit. If an investor decides they want to sell a portion of their investment portfolio to avoid the market’s gyrations, they must take serious consideration in the risk coming with that sale and the tax on their capital gains. For example, assume the investor’s adjusted basis is $1 million, this would mean the value of their portfolio sold appreciated to $2 million during their hold time and when they sell that portion, their profit will be $1 million. This is the current $2 million value, less the $1 million basis. However, the investor does not walk away with that $1 million. Rather, the profit will be taxed at a rate of 23.8%1, assuming their state doesn’t level a capital gains tax. The potential result is that they would owe the Internal Revenue Service (IRS) $238,000. While the remaining $1.762 million is still a tidy sum, it would be more beneficial for the investor to hold the tax money, rather than immediately handing it over to the government. Minimizing or Eliminating Capital Gains Tax There are options when it comes to minimizing or eliminating your capital gains tax. For example: Donate your investment to a charity and avoid paying taxes. “Harvest” losses in your investment portfolio to offset the gains. Leave it to your heirs. They receive a step-up in basis to fair-market value, meaning no taxes are owed on any gain2. Invest your gains into a Qualified Opportunity Fund. This exciting option became available on Jan. 1, 2018. While giving you some powerful tax advantages on your capital gain liability, it also allows you to do good in the community. The Benefits of a Qualified Opportunity Fund As previously discussed, the Qualified Opportunity Zones Program, in which investors can place capital gains from an asset sale into federally designated Qualified Opportunity Zones (QOZs) through investment in certified Qualified Opportunity Funds (QOFs). These investment help build up a lower-income area, while deferring capital gain taxes until Dec. 31, 2026. Additionally, the longer one holds that QOF, the fewer taxes one could owe. For example: A five-year hold gives you a 10% step-up in basis on your original deferred gain. A seven-year hold gives you an additional 5% step-up in basis on your original deferred gain. An investment held for 10 years or more means you owe NO capital gains taxes on any appreciation that occurs within the fund once it is liquidated. The chart below compares the above-mentioned $1 million gain from the sale in a Qualified Opportunity Fund, versus investing the after-capital-gains tax amount of $762,000.3 Other Assumptions: Taxpayer is married filing jointly with ordinary income of $500,000 (35% federal tax bracket). Each opposing investment is assumed to have the same return on investment (7.5%), and same annual appreciation (5.0%). Liquidation values are assumed to be added to pre-tax cash flow in 2028. After-tax earnings exclude negative cash-flow from initial investment in 2018. * Deferred capital gains tax realized on QOF investment - includes 15% step-up in basis. Includes ordinary income tax on $75,000 of investment income earned. All other assumptions being equal, the investor could earn incremental after-tax earnings of $415,456 -- in other words, a 27.7% increase in total cash earned over a 10-year period, simply by deciding to invest their capital gains into a Qualified Opportunity Fund, versus a non-QOF investment vehicle. For the purposes of this example, the taxpayer is married filing jointly with income in excess of $488,500, and is assumed to have held the investment for more than one year. This rate assumes no other deductions have been taken, and only considers the long-term federal capital gains rate (20%) and medicare surtax (3.8%). Assuming your total estate is under estate tax exemption limits. This is a simplified hypothetical example. Actual tax savings may vary as they depend upon your tax rate, limits on deductions, impacts to your alternative minimum tax, and any other tax related items specific to an investor.", "articleSection" : [ "Capital Gains" ], "author" : { "@type" : "Person", "email" : "marketing@realized1031.com", "image" : "", "name" : "The Realized Team", "url" : "https://www.realized1031.com/blog/author/the-realized-team" }, "dateModified" : "2020-12-02T21:02:16+0000", "datePublished" : "2020-12-02T21:02:16+0000", "description" : "Most investors are likely aware that geopolitical turmoil exerts its toll on the markets and, in turn, on their investment portfolio.", "headline" : "Capital Gains Strategies: Taking Charge Of Your Gains", "image" : { "@type" : "ImageObject", "height" : 460, "url" : "https://cdn2.hubspot.net/hubfs/733513/Images/photo/people/business/investing-gains-optimized-istock.jpg", "width" : 800 }, "mainEntityOfPage" : "https://www.realized1031.com/blog/capital-gains-strategies-taking-charge-of-your-gains", "name" : "Capital Gains Strategies: Taking Charge Of Your Gains", "publisher" : { "@type" : "Organization", "address" : { "@type" : "PostalAddress", "addressCountry" : "USA", "addressLocality" : "Austin", "addressRegion" : "TX", "postalCode" : "78701", "streetAddress" : "500 W 13th Street " }, "logo" : { "@type" : "ImageObject", "height" : 60, "url" : "http://www.realized1031.com/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black-No-Margin-296x60-AMP.png", "width" : 296 }, "name" : "Realized" }, "thumbnailUrl" : "https://cdn2.hubspot.net/hubfs/733513/Images/photo/people/business/investing-gains-optimized-istock.jpg" } ```