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Maximizing Your Financial Gains: Smart Strategies in Tax-Loss Harvesting and Qualified Opportunity Fund Investments

Opportunity Zone Construction Site

As the end of the year approaches, many investors turn their attention to tax-loss harvesting, a common strategy to offset realized capital gains in their portfolios. However, there’s an alternative that might offer more flexibility and potential benefits: investing in Qualified Opportunity Zone Funds (QOFs).

 

Understanding QOFs for Capital Gains Deferral

QOFs present an attractive option for deferring capital gains from various sources, including the sale of businesses, stocks, cryptocurrency, or real estate. By investing in a QOF within 180 days of realizing these gains, investors can defer their tax liability until December 31, 2026. This deferral doesn’t require netting losses against these gains, meaning investors can defer 100% of their gain while carrying forward any realized losses.

 

Strategic Benefits of QOF Investment

Investing in a QOF can be strategically beneficial in multiple ways:

Full Deferral of Gains: The ability to defer the entire amount of realized gains provides immediate tax relief and more flexibility in financial planning.

 

Carrying Forward Losses: Realized losses can be carried forward, potentially offsetting future capital gains. This is particularly advantageous if capital gains tax rates rise or if other opportunities like QOF investments are less available in the future.

 

Using Losses in 2026: When the deferred gain becomes taxable in 2026, any losses harvested between now and then could be used to offset this liability, potentially reducing the overall tax burden.

 

The Power of Combining Tax-Loss Harvesting with QOF Investment

Integrating QOF investment with tax-loss harvesting can potentially create a powerful tax mitigation strategy. Deferring the capital gain tax liability to 2026 allows for strategic planning over several years. This planning phase can include additional tax-loss harvesting to help reduce the future tax impact. Moreover, the investment in the QOF itself carries significant potential, as it can grow tax-free if held for at least ten years.

 

Conclusion and Invitation for Professional Assistance

For clients experiencing capital gains events through various channels, such as stock sales, real estate transactions, or business sales, exploring the synergy between tax-loss harvesting and QOF investments could be a game-changer in their tax planning strategy. Professional guidance in navigating these options can optimize tax benefits and align with long-term financial goals. As such, scheduling a meeting with someone from Perch Wealth which is well-versed in tax mitigation strategies is highly recommended to explore personalized approaches to capital gains management. Contact us today to see how we might be able to help you.

 

 

 

 

1031 Risk Disclosure:
  • There is no guarantee that any strategy will be successful or achieve investment objectives;
  • Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments;
  • Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;
  • Potential for foreclosure – All financed real estate investments have potential for foreclosure;
  • Illiquidity – Because 1031 exchanges are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments.
  • Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;
  • Impact of fees/expenses – Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits
General Disclosure

Not an offer to buy, nor a solicitation to sell securities. All investing involves risk of loss of some or all principal invested. Past performance is not indicative of future results. Speak to your finance and/or tax professional prior to investing. Any information provided is for informational purposes only. Securities offered through Arkadios Capital, member FINRA/SIPC. Advisory Services offered through Arkadios Wealth. Perch Wealth and Arkadios are not affiliated through any ownership.

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Perch Wealth provides you with access to institutional-quality real estate, management, financing and state of the art 1031 exchange processing.

855-DST-3443

info@PerchWealth.com

29122 Rancho Viejo Road
Suite 111
San Juan Capistrano,
California 92675

Not an offer to buy, nor a solicitation to sell securities. All investing involves risk of loss of some or all principal invested. Past performance is not indicative of future results. Speak to your finance and/or tax professional prior to investing. Any information provided is for informational purposes only. Securities offered through Arkadios Capital, member FINRA/SIPC. Advisory Services offered through Arkadios Wealth. Perch Wealth and Arkadios are not affiliated through any ownership.

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© 2023 Perch Wealth.

Real Estate / 1031 Risk Disclosure:
  • There’s no guarantee any strategy will be successful or achieve investment objectives;
  • All real estate investments have the potential to lose value during the life of the investments;
  • The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;
  • All financed real estate investments have potential for foreclosure;
  • These 1031 exchanges are offered through private placement offerings and are illiquid securities. There is no secondary market for these investments;
  • If a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;
  • Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits;
  • Tax benefits are not guaranteed and are subject to changes in the tax code.