In New York, they can take a huge chunk of your wealth if you let them in capital gains taxes. That is a lot of your hard-earned money we’re talking about here. Taxes are a complicated creature, but if you’re a New York high-net-worth individual or business owner, you know that all too well.
However, it is important to know how capital gains taxes work. Obviously, you want to hang onto as much money as possible, so you need to make smart financial decisions that preserve your future.
At Dominion, we’ve earned our reputation by helping clients like you through these treacherous times. More than advisors, we’re your allies in the battle to protect and grow your wealth. Here, we give you a clear picture of capital gains taxes in New York and how you can minimize their impact.
Defining Capital Gains Tax
Capital gains. You’ve heard the term bandied about in financial circles, but what does it actually mean? To make this easy to understand, it’s the money you earn if you sell an asset for more than you paid for it. This can be anything from stocks and real estate to a rare painting or vintage car.
Realized and Unrealized
But here’s where it gets a little more nuanced – there are two types of capital gains: realized and unrealized. Capital gains you’ve actually pocketed from selling an asset are called realized capital gains.
On the other hand, unrealized gains are the profits only on paper. Think of it like this: If you have stock that is up in value but you haven’t sold, that’s an unrealized gain. You haven’t actually realized profit until you sell the stock.
Short-Term and Long-Term
Then, on top of that, there are short-term and long-term capital gains. If you sell an asset you’ve held for one year or less, short-term gains apply. Assets you’ve held for longer than a year are long-term gains.
The distinction is important because it determines how much you will owe in taxes. In general, taxes are paid on long-term capital gains at the lower rate than on short-term gains. Make sense?
Capital Gains Tax in New York
Now, let’s talk about the part no one enjoys: taxes. In New York, if you realize a capital gain, you will pay taxes at the federal and state levels. It’s a two-pronged attack on your profits.
The tax rate at the federal level depends on your income bracket and how long you’ve held the asset. The rates for long-term capital gains are 0%, 15%, or 20%, based on your income. The gains are taxed at your ordinary income tax rate, which can be as high as 37%, on short-term gains.
And New York State wants its cut. State capital gains tax rates are progressive, i.e., the more you earn, the higher the rate. The rates run from 4% to a whopping 10.9% for those with the highest incomes.
Let’s Look at an Example
Let’s say you’re a New York resident who sold a property for a $500,000 profit after holding it for five years. At the federal level, you’d probably be in the 15% long-term capital gains bracket. You’d pay a blended rate in New York, with your gains falling into different brackets that are based on New York rates.
These can be a big deal when it comes to your investment decisions. For example, you might decide not to sell an asset, or you might decide to hold on to it longer to qualify for the lower long-term capital gains rates because you know the tax implications. When you’re dealing with substantial assets, it’s a delicate balancing act.
This is why we need strategic planning. Understanding the capital gains tax intricacies will help you make the kinds of decisions that will make your wealth last. And let’s be honest here: who has the time or expertise to go deep into the tax law? Again, if we’re being honest, not many. That’s where we come in.
Dominion Takes a Strategic Approach
By now you probably know that capital gains taxes are no picnic. The stakes are high, the consequences of mistakes are severe, and it’s complicated. You may be tempted to use those one-for-all-all-for-one tax planning solutions you see advertised everywhere. But if we’re being real, those generic approaches don’t always work, particularly when you’re talking about substantial wealth.
Those generic solutions, we simply can’t abide. You’ve got a unique situation. Shouldn’t your tax planning strategy be unique, too? We certainly think so; we believe in creating bespoke strategies that are tailored to your needs and goals.
We look at every bit of your financial life – every asset, every income stream, every investment – to fully understand your situation. Then we create a customized plan to minimize your tax liabilities and protect your wealth for generations.
In New York, we’ve helped countless high-net-worth individuals and families overcome the complicated nature of capital gains taxes. We have a track record to prove it. Through this, we’ve saved our clients millions in taxes to help them keep their wealth and fulfill their financial goals.
Tax Planning Strategies for Capital Gains in New York
We don’t just talk about tax planning at Dominion, we do it. Using a variety of sophisticated strategies, we help our clients keep more of their hard-earned money. Here are a few of our go-to approaches:
Trusts: Asset Protection Cornerstone
Trusts are a great way to asset protect and keep taxes low. As such, we frequently suggest that the creation of trusts in more favorable domestic and international locations shields assets from creditors and decreases tax liabilities.
For example, we recently helped our client in New York set up a trust in a jurisdiction which offers favorable tax laws. The client was able to reduce their state capital gains tax burden when they sold those assets by transferring some of those assets to the trust.
International Structures: Expanding Your Options
We’re not afraid to explore the world. To create comprehensive asset protection plans, we use international structures and jurisdictions. It might be creating an offshore company or trust in a country whose tax laws are to your advantage.
For instance, we helped a business owner who wanted to take their operations overseas. In order to minimize their tax burden on profits from their international ventures, we helped them set up a company in a low-tax jurisdiction.
Other Opportunities in Renewable Energy
We are always looking for ways to use tax incentives and deductions. For example, investing in renewable energy projects can lead to obtaining huge tax benefits.
Recently, we advised a client on an investment in a solar energy project. We helped the client to take advantage of the tax credits that are available and offset your capital gains tax liability a large portion.
Charitable Giving: How to Make a Difference While Reducing Taxes
Giving to charity isn’t just good for the soul, it can be good for your tax bill, too. We assist clients with examining charitable giving strategies that allow clients to pursue their philanthropic goals and benefit from tax advantages.
We’ve assisted a client in setting up a charitable remainder trust. The client was able to make a large charitable donation, receive a large tax deduction, and create income from the trust.
These are just a couple examples of how we help clients keep their tax liability on the minimum. We are proactive; always searching for new tax strategies, staying up to date on the latest tax laws.
Choose Dominion for Specialized, Qualified Asset Protection
When it comes to protecting your wealth, you can’t take any chances. As an asset protection and tax elimination leader, Dominion’s reputation has been decades in the making and is the product of hard work and dedication to our clients.
Our resources run deep, bringing you a vast network of top-tier financial and legal advisors, all with a deep understanding of the complex world of wealth preservation.
To protect what you’ve worked so hard to obtain, we provide access to international jurisdictions and resources meaning we can construct international strategies that can protect your assets, regardless of location.
The world is always changing and we know that we change with it. We’ve committed ourselves to remaining ahead of the game in the face of new laws and regulations, so your wealth is always protected.
Who Would You Want in Your Corner?
And if you’re serious about making sure your assets are safe and you’re not overpaying in taxes, you need a partner who understands the subtleties of wealth governance. You have the expertise and resources with Dominion to see you through. Yes, we push the stakes high, but we’re also ready to help you turn your dream of financial independence into a reality.
So to close, if you’re unsure about your financial future, get in touch. Just a quick call. They are your assets and we can help make them stronger so that you can sleep at night knowing you are ready for what life throws at you.
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