You might remember Jane Fonda's aerobics videos on VHS or Betamax from the 1980s. She
would often use the phrase, "No Pain, No Gain," to remind and encourage followers that getting
what you wanted requires sacrifice; tone muscles weren't free and needed to "feel the burn" to
see results. We would tend to disagree with that mantra.
Investors are often reluctant to lock in gains knowing their actions might trigger a tax liability.
Depending on your income range and state, taxes could quickly erode the gains, possibly by as
much as 35%. Gains on investments held for less than a year are subject to even higher
ordinary tax rates. Thanks to legislation in 2017, you can offset the gains through the use of
Qualified Opportunity Zones (QOZs).
In the past few years, many investors have looked at using this part of the tax code with a
liquidity event (sale of real estate or a business); however, that is just the beginning. How low is
the basis in your investment portfolio? Now might be the time to reallocate. Are your mutual
funds forecasting capital gains? The entire distribution can continue to work. Did you buy
stocks at market lows earlier this year? Tax concerns shouldn't hold you back from capturing
your earnings.
Investing in Qualified Opportunity Zones might be the strategy that allows more of your money
to keep working. Advantage Wealth Solutions continues helping clients access tax benefits
through turn-key portfolios. If you are thinking about your investments, you may enjoy the gain
without the pain.
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