Minimizing Capital Gains Taxes on the Sale of Stock

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By: Satya Yeruva

Investors incur capital gains taxes every time they sell stock for more than they paid. Taxes may vary depending on how long the shares were held. You can minimize your capital gains taxes – and continue to build wealth – by employing the right tax planning strategies.

  • Hold your stocks for more than a year before selling them and you will get taxed at the lower, long-term capital gains rate.
  • Avoid wash sales, which are when investors sell securities at a loss, then repurchase a “substantially identical” security within 30 days, to claim a tax benefit.
    • If you are affected by the wash-sale rule, your loss will be added to the cost basis of the new securities you purchase. Your cost basis is the value of your stock for tax purposes. When the value of your cost basis decreases, your capital gains will be higher when you eventually sell your stock.
  • Donate stocks to charity instead of donating cash proceeds from the sale of those stocks.
  • Buy and hold qualified small business stock (QSBS) for at least five years and you will not be taxed on capital gains. Shareholders of C corporations that are qualified small businesses are eligible.
  • Defer taxes by reinvesting your capital gains within 180 days in opportunity zone funds:
      1. There is no requirement to invest in a like-kind property to defer the gain.
      2. You can defer capital gains taxes until 2026.
      3. Receive a step up in tax basis of 10% if you hold the investment for five years, and up to 15% if you hold it for seven years. This means the value of your cost basis in the investment will increase from the amount that you originally paid, reducing your total capital gains tax when you sell the investment.
      4. You can potentially avoid taxes on appreciation.
  • Pass your stock on to your inheritors at your death:
      1. The stock will be “stepped up in basis” to the current fair market value for your recipients. This means that when your recipients sell the stock, their cost basis will be based on the fair market value at the time they inherited the stock instead of the value that you originally paid for the stock. This means they will save big on capital gains taxes when they eventually sell the stock.
      2. If you give your stock as a gift during your lifetime, the recipient’s cost basis is the same as the cost that you originally paid for the stock. This leads to higher capital gains taxes.
  • Put your stock into a ROTH IRA early on and it will grow tax-free.


Consult with an experienced Chugh, CPAs LLP tax professional for help reducing your capital gains and other tax liability.