Capital Gains Tax Strategies

For 2024, long-term capital gains rates are 0%, 15%, or 20%, depending on your taxable income. Single filers with taxable income up to $47,025 pay 0%. The 15% bracket runs up to $518,900, and anything above that hits 20%. Married filing jointly thresholds are $94,050 for the 0% rate and $583,750 before the 20% rate kicks in. Short-term gains — assets held one year or less — are taxed as ordinary income, which can mean rates as high as 37% at the federal level.

Here’s what a lot of people miss: there’s an additional 3.8% Net Investment Income Tax (NIIT) under IRC Section 1411 that applies once your modified adjusted gross income exceeds $200,000 (single) or $250,000 (married). So your effective capital gains rate can actually reach 23.8%, not 20%. New York State also layers on rates up to 10.9%, and NYC residents add another 3.876% city tax. That means a high-income NYC resident could face a combined federal, state, and city rate north of 35% on long-term gains.

When clients at The Reed Corporation ask about this, the first thing we do is run a projection to see exactly where their income lands relative to each threshold — sometimes shifting a sale by even one month changes the bracket entirely. If you’re planning a significant asset sale this year, it’s worth running the numbers before you close the deal.

Selling investment property in New York triggers both federal and state capital gains tax, but there are several legal strategies that can reduce what you owe. A 1031 like-kind exchange under IRC Section 1031 lets you defer federal capital gains tax entirely by rolling the proceeds into a qualifying replacement property. You have 45 days from the sale to identify a replacement property and 180 days to close on it. Miss either deadline and the entire gain becomes taxable in that year.

One thing many property owners overlook is depreciation recapture. Even if your overall gain qualifies for long-term rates, any depreciation you’ve claimed over the years gets recaptured at a flat 25% federal rate under IRC Section 1250. On a building you’ve held for 15 years, that recapture amount can easily reach six figures. Also, New York State doesn’t conform to federal installment sale rules in exactly the same way, so spreading payments over several years through an installment sale (Form 6252) requires careful state-level analysis.

At The Reed Corporation, we typically start planning for a property sale 12 to 18 months out. That window gives us time to evaluate whether a 1031 exchange makes sense, whether an installment structure fits your cash flow, and how to time the transaction around your other income for that year. Getting ahead of the sale — rather than calling us after it closes — makes a real difference in your final tax bill.

Tax-loss harvesting means selling investments at a loss to offset capital gains you’ve realized elsewhere in your portfolio. Yes, it works — and it can save real money. Capital losses offset capital gains dollar for dollar. If your losses exceed your gains, you can deduct up to $3,000 of the net loss against ordinary income each year, and any remainder carries forward indefinitely to future tax years. You report all of this on Schedule D and Form 8949.

The part people often get wrong is the wash-sale rule under IRC Section 1091. If you sell a security at a loss and buy the same or a ‘substantially identical’ security within 30 days before or after the sale — either direction — the IRS disallows the loss. That 61-day window trips up a lot of investors who sell at a loss on December 28th and immediately repurchase on January 3rd. The rule applies to IRAs too, so you can’t sidestep it by buying the same stock in a retirement account. Cryptocurrency is currently exempt from wash-sale rules, though legislation to change that has been proposed repeatedly.

We help clients at The Reed Corporation review their brokerage accounts before year-end — usually in October or November — to identify harvesting opportunities while there’s still time to act. It’s a straightforward process, but the wash-sale rules require careful tracking across all your accounts, and that’s where having a CPA in your corner really pays off.

Possibly, but many homeowners qualify for an exclusion that wipes out most or all of the gain. Under IRC Section 121, you can exclude up to $250,000 of gain from the sale of your primary residence ($500,000 if married filing jointly). To qualify, you must have owned and lived in the home as your primary residence for at least 2 of the last 5 years before the sale. You report the sale on Form 8949 and Schedule D, but if your gain falls within the exclusion, it’s not taxable at the federal level.

Here’s the catch in New York City specifically: gains above the exclusion threshold are subject to federal tax, plus New York State tax at rates up to 10.9%, plus NYC’s personal income tax at up to 3.876%. NYC real estate prices being what they are, it’s not unusual for a homeowner who bought 20 years ago to have a gain that exceeds the exclusion — sometimes by hundreds of thousands of dollars. Also, if you rented any portion of the home or claimed a home office deduction in prior years, the calculation gets more complicated and the exclusion may only apply to part of the gain.

If you’re thinking about selling your home and you’re unsure whether you’ll owe taxes, it’s smart to run through the numbers before you list the property. The Reed Corporation works with NYC homeowners regularly on exactly this kind of pre-sale analysis, so there are no surprises at closing.

Small business owners have access to some powerful capital gains tax strategies that employees typically don’t. One of the biggest is the Section 1202 Qualified Small Business Stock (QSBS) exclusion, which allows you to exclude up to 100% of the gain on the sale of qualifying C-corporation stock — up to $10 million or 10 times your basis, whichever is greater. To qualify, the stock must be held for more than 5 years, acquired at original issuance, and the company’s gross assets can’t exceed $50 million at the time of issuance.

Another strategy is a Section 1045 rollover, which lets you defer QSBS gain if you reinvest into other qualifying small business stock within 60 days. For business owners selling a company that doesn’t qualify for QSBS, an asset sale structured with an installment note (Form 6252) can spread the tax liability over several years, potentially keeping you in lower brackets each year. If you’ve got appreciated business assets, a Qualified Opportunity Zone (QOZ) investment under IRC Section 1400Z-2 can defer and partially reduce the capital gains tax while you build in a new investment.

These strategies all have real eligibility requirements and timing constraints — QSBS planning in particular needs to be done well before any sale discussions begin. The Reed Corporation works with small business owners in NYC on the full picture, from entity structure through exit planning, so that when it’s time to sell, you’ve already positioned yourself to keep as much of the proceeds as legally possible.