Capital Gains Taxes for Coaches and Consultants in 2024

Jun 12, 2024 | Taxes

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Learn how to minimize taxes owed when selling a business asset.

If you’re a coach or consultant who invests, understanding capital gains taxes is crucial for optimizing and maintaining the financial health of your business.
Navigating the complex world of taxes can often feel overwhelming, especially when it comes to understanding the nuances of capital gains taxes.
Whether you’re a seasoned business owner with a large investment portfolio or you’re just starting out, knowing how capital gains are taxed can help you make the best financial decisions for your business.
This month, we’re exploring capital gains taxes: what they are, who owes them, and the most effective strategies for lowering your capital gains tax burden.

What Are Capital Gains, Exactly?

Capital gains taxes apply to the profit you make from selling assets like stocks, real estate, or other investments. These taxes can significantly impact your overall returns, making it important to grasp both the basics and the specific regulations for this tax year.

How Are Capital Gains Taxes Relevant to Coaches and Consultants?

When you hear “capital gains,” you likely think of traditional personal investments like real estate, stocks, and mutual funds. While capital gains taxes indeed apply to personal asset sales, they’re equally important to consider when selling business assets. Here are a few business assets the tax pros here at Tax Savvy Jessica have helped our coaching and consulting clients navigate:

  1. Selling Investments: If you’ve invested in stocks, bonds, mutual funds, or other traditional investments, the sale of these investments can result in capital gains.
  2. Selling Business Assets: As your business grows, you might acquire various business assets like equipment, software, tech, or even a percentage of a business. Selling these things can trigger capital gains tax.
  3. Real Estate Transactions: If you own property used to run your business and decide to sell it, any profit from the sale is considered a capital gain.
  4. Selling Intellectual Property: As a coach or consultant, you’ve probably created valuable intellectual property like online courses, coaching programs, or books.
  5. Retirement Accounts and Investments: Contributions to your retirement accounts (like IRAs or 401(k)s) might be subject to capital gains tax depending on the type of account.
  6. Business Sales: If you decide to sell your business, the profit could be subject to capital gains tax.

Understanding capital gains taxes can empower you to make informed financial decisions, optimally positioning your business for financial success.

Short-Term vs. Long-Term Capital Gains

Short-term capital gains are profits from assets held for one year or less, taxed at your ordinary income tax rate. Long-term capital gains, from assets held for more than one year, are taxed at a lower rate, reducing the tax owed. Holding investments longer before selling often makes financial sense.
For example, if you bought a business property on January 1, 2024, for $300,000 and sold it in November 2024 for $350,000, the $50,000 profit is a short-term gain, taxed at your regular rate. At a 24% rate, you’d owe $12,000 in taxes.
In summary, selling assets held for less than a year results in higher taxes. Holding them for over a year leads to lower tax rates, saving you money. Understanding these differences helps you decide when to sell and maximize your profit.


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Strategies to Minimize Capital Gains Taxes

As with anything tax related, there are proven strategies you can leverage to lower your capital gains tax burden.

  • Optimize Deductions & Adjustments: Some expenses, like making improvements to a property, can increase your cost basis and reduce your taxable gains.
  • Consider Optimal Timing: Plan the sale of assets to fall into a year where your income is lower to benefit from lower tax rates. Holding assets for over a year to qualify for long-term rates can significantly reduce taxes owed.
  • Utilize Tax-Loss Harvesting: Offset gains with losses from other investments to reduce your overall taxable income.

Consult a Tax Professional for Optimal Tax Saving Strategy

Navigating capital gains tax can be complex, making a Tax Pro like Tax Savvy Jessica crucial to streamlining your business’s financial journey. With our proven expertise, emphasis on strategic planning, and personalized advice tailored to your unique business, Tax Savvy helps you make the best financial decisions for your situation.

Let us take the stress out of managing capital gains tax, so you can focus on what you do best—growing your business. Trust Tax Savvy Jessica to guide you through the complexities of tax regulations with ease and confidence.

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I’m the passionate tax-pert behind Tax Savvy Jessica. I spent more than 10 years performing audits for the IRS. My experience there taught me how to understand taxes from the perspectives of both taxpayers and the IRS.

I started Tax Savvy Jessica because I’m passionate about helping small business owners understand their taxes so they can use their money to build the life they want.

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