Tax Planning

Understanding the Ripple Effects of Federal Interest Rate Cuts

By David D’Albero

Federal interest rate cuts often make headlines, but what do they really mean for your financial picture? While the announcements may seem like economic jargon, they carry significant implications for everyday financial decisions and long-term wealth building strategies. By understanding how these changes impact borrowing, investing, and the economy as a whole, you can make informed choices to navigate shifting financial landscapes effectively.

What Happens When the Federal Reserve Cuts Interest Rates?

At its core, a Federal Reserve interest rate cut lowers the cost of borrowing money. This monetary policy tool is often used to stimulate economic growth by encouraging spending and investment. When rates drop, it becomes less expensive for businesses and individuals to access credit, which can fuel economic activity. However, this ripple effect doesn’t come without complexities. Each aspect of your financial life—mortgages, personal debt, and investments—feels the impact differently, presenting both opportunities and risks.

Mortgages: Timing the Opportunity or Facing a Price Surge

One of the most noticeable effects of a rate cut is on mortgage rates. For prospective homebuyers, lower rates may reduce monthly payments, making homes more affordable in the short term. If you’ve been eyeing a particular property, a rate cut could feel like the ideal moment to act. Additionally, for those with existing mortgages, refinancing to lock in a lower rate can save substantial money over time and free up some additional cashflow. Yet, there’s a flip side to this scenario. Lower borrowing costs often lead to increased demand in the housing market. As more buyers compete for homes, prices can rise, potentially negating the benefits of reduced rates. For high-net-worth individuals planning a move or considering investment properties, these dual effects warrant careful analysis of timing and price trends.

Credit Cards and Personal Loans: Easier Borrowing, Bigger Risks

Rate cuts don’t just affect long-term loans like mortgages; they also lower the interest rates on revolving debt such as credit cards and personal loans. For those managing existing debt, this can provide an opportunity to refinance or pay down balances more effectively. However, lower rates often encourage increased borrowing, which can be a double-edged sword. Accumulating new debt without a clear repayment strategy can lead to financial strain, especially if rates rise again in the future. This is especially true for those who chose to take on variable rate debt when rates are low.

Investments: Growth in the Market, Declines in Savings Yields

The connection between interest rate cuts and the stock market often garners attention. Lower borrowing costs for companies can drive growth initiatives, leading to stock price increases. Investors with diversified portfolios may see gains as markets respond positively to easier credit conditions. However, it’s not all good news. Interest-bearing accounts such as savings accounts, CDs, and short-term bonds typically offer lower returns when rates are cut. For individuals relying on these vehicles for income, it’s essential to reassess allocation strategies to maintain balance and meet financial objectives. Keep in mind that market optimism following rate cuts can create volatility. A thoughtful approach to risk management remains paramount.

The Broader Economy: Stimulus vs. Inflation

Interest rate cuts are designed to stimulate the economy, but their effects extend beyond individual finances. Cheaper borrowing can incentivize businesses to expand, hire more employees, and even increase wages. This economic boost can create a favorable environment for wealth growth. However, there is an inherent risk of inflation when rates remain low for an extended period. As spending increases, the cost of goods and services may rise, eroding purchasing power. Historical examples, such as the post-COVID inflation surge, illustrate how prolonged low rates can stimulate prolonged high inflation, which can lead to strain on household budgets and financial planning strategies. While rate cuts aim to balance growth with stability, the Federal Reserve must carefully navigate the fine line to avoid unintended consequences.

Balancing Opportunities and Risks

Understanding the dual nature of interest rate cuts—how they present opportunities alongside challenges—is essential for maintaining financial stability and growth. Whether you are evaluating a mortgage, considering debt consolidation, or adjusting an investment strategy, the broader economic context and potential impact of future rate changes should be considered in guiding your decision-making.

The Importance of Proactive Financial Review

In an environment of changing interest rates, staying informed and adaptable is key. Reviewing your financial plans regularly ensures they remain aligned with both short-term goals and long-term aspirations. Taking the time to assess how lower rates affect each component of your wealth—from borrowing and investing to saving and spending—can provide clarity and confidence. While rate cuts may present compelling opportunities, they also demand a measured approach to avoid potential pitfalls.

Strata Capital is a wealth management firm serving corporate executives, professionals, and entrepreneurs in the New York Tri-State Area, focusing on corporate benefits and executive compensation. Co-founded by David D’Albero and Carmine Coppola, the firm specializes in making the complex simple to ensure clients feel confident in their financial decisions. They can be reached by phone at (212) 367-2855, via email at carmine@stratacapital.co, or by visiting their website at stratacapital.co.

Cornerstone Planning Group, Inc., (“CSPG”) is an SEC registered investment advisory firm. The information contained herein should not be construed as personalized investment advice and should not be considered as a solicitation for investment advisory service. The information (e.g., tax ) provided is believed to be accurate however CSPG does not guarantee or otherwise warrant such information. For more information regarding CSPG you can refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov) and review our Form ADV Brochure and other disclosures.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Unlocking the Potential of Tax Assets: A Key to Strategic Wealth Management

By Carmine Coppola

Have you ever wondered how you can legally reduce your tax bill and keep more of your hard-earned income? Tax assets represent one of the most underutilized tools in a high-net-worth individual’s financial arsenal. By harnessing the power of deferred tax assets, you can not only save on taxes today but position yourself for greater financial growth tomorrow.

At Strata Capital, our team and has spent the last decade helping high-net-worth corporate professionals optimize their financial strategies, including harvesting tax assets. Let’s dive into what tax assets are, how they work, and why they’re a critical component of your long-term wealth strategy.

What Are Tax Assets?

At their core, tax assets are financial tools designed to reduce future tax liabilities. Think of them as a strategic buffer—a reservoir of potential savings that can be tapped when the timing is optimal.

There are two main categories:

Deferred Tax Assets: These arise when you’ve overpaid taxes or incurred losses in a given year. These losses can be carried forward to offset future taxable income.
Tax Credits: These directly reduce the taxes you owe, much like a gift card for your tax bill.

Today, we’ll focus on deferred tax assets. They offer control and flexibility in managing tax liabilities over time—a critical advantage for high-net-worth individuals.

Why Deferred Tax Assets Matter

Deferred tax assets aren’t just a tax-saving measure; they’re a strategic lever to enhance your financial picture.

They allow you to offset gains from investments, significantly reducing your tax obligations. For example, if you sell a stock with a $100,000 gain (with a 15% tax rate), you’d owe $15,000 in taxes. However, if you also have $50,000 in unrealized losses, selling those positions could cut your tax bill in half.

They enable tax deferral for greater growth. By deferring taxes, you can keep more of your money invested, allowing it to compound over time. This creates a “tax asset balance” that can be carried forward, providing long-term financial advantages.

Case Study: Strategic Tax Asset Harvesting

Let’s say you have a $100,000 unrealized gain on a stock and a $300,000 carryforward loss from prior years. By applying $100,000 of that loss against the gain, your net tax liability is reduced to $0.

This strategy isn’t limited to stocks. The same approach can extend to other areas, such as real estate investments or the sale of a business.

For those in high-tax states like New York, the benefits are even greater. New York allows you to carry forward losses at the state level as well, creating additional savings opportunities.

Reducing Ordinary Income Taxes

Deferred tax assets aren’t limited to investment gains. In many jurisdictions, you can use them to reduce your ordinary income tax liability as well.

For example, up to $3,000 in capital losses can be deducted from your ordinary income each year. While $3,000 may seem small, over time, it adds up and becomes another layer of financial efficiency.

Risks and Considerations

No financial strategy is without risks, and tax asset harvesting is no exception.

This approach requires a deep understanding of tax laws, timing, and how it fits into your broader financial plan. Missteps could lead to missed opportunities or unintended tax liabilities.

This is why it’s essential to work with a trusted advisor who specializes in tax optimization for high-net-worth individuals.

The Strata Capital Advantage

At Strata Capital, we don’t just harvest tax assets—we craft personalized strategies that integrate them into your broader financial goals.

Our concierge-level service ensures every aspect of your wealth management is aligned, from investment planning to estate strategies. By acting as the central conductor of your financial team, we simplify complexities so you can focus on your career, family, and legacy.

Take Action Today

Tax assets are one of the most powerful yet underutilized tools in your financial toolkit. By understanding and gathering them, you’re not just reducing taxes—you’re creating opportunities for growth and financial freedom.

If you’re ready to unlock the full potential of tax assets, schedule a consultation with Strata Capital today. Together, we’ll pull back the curtain on the financial industry and create a higher standard for your wealth management.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Unraveling the Mystery: 8 Reasons You Might Owe Money on Your Taxes

Are you among the millions of taxpayers who dread tax season for fear that you may owe money to Uncle Sam? While receiving a refund is often seen as a financial win, owing money is usually considered an unwelcome surprise. However, understanding what led to your tax bill can help you optimize your finances to make tax time a little less scary. Let’s explore some of the most common reasons why you might find yourself owing money to the IRS.

Understanding US Tax Rates

To get started, let’s look at current tax rates and how the US tax system works.

The US employs a progressive tax model, meaning as your income increases, so does the tax rate applied to your earnings. The chart below illustrates the progressive nature of the US federal income tax system, where higher rates apply to higher income levels. For example, if you are filing single and your taxable income falls within the range of $47,150 to $100,525, you would pay 10% on the first $11,600 of income, 12% on the portion of income between $11,600 and $47,150, and 22% on the remaining income within that range.

2024 Tax Brackets

Tax Bracket

In a progressive tax system, your tax rate increases with your income. The more you earn, the higher your tax rate, with income categorized into brackets to determine these rates. This structure aims to tax individuals based on their ability to pay, meaning lower-income earners contribute a smaller portion of their income than higher earners.

Marginal Tax Rate

Your marginal tax rate is applied to your highest income dollar. It’s the highest tax rate you pay on any part of your income. Your marginal tax rate increases as you earn more income and move into higher tax brackets. For example, if you earn $50,000, your first $10,000 may be taxed at 10%, the next $20,000 at 15%, and the remaining $20,000 at 20%. While your highest, or marginal, tax rate is 20%, only the last portion of your income is taxed at this rate.

Effective Tax Rate

Your effective tax rate is the actual percentage of your income paid in taxes, considering all your deductions, credits, and exemptions. It’s an accurate gauge of your tax burden, offering a more precise picture than just your tax bracket’s rate. Imagine you earn $50,000. After deductions and exemptions, your taxable income is $40,000. If you paid $6,000 in taxes, your effective tax rate would be 15% ($6,000 divided by $40,000), indicating the overall percentage of your taxable income that went to taxes.

Average Tax Rate

The average tax rate is the total amount of taxes paid divided by taxable income, which measures the overall tax burden as a percentage of income. It represents the average rate at which income is taxed and is distinct from the effective tax rate, which considers adjustments such as deductions and credits. If your total income is $50,000 and your total tax paid is $6,000, your average tax rate is 12% ($6,000 divided by $50,000). This rate reflects the percentage of your total income that went towards taxes.

Reasons You Could Owe Taxes

Managing your tax obligation can become complex, especially when faced with scenarios that aren’t straightforward. Many taxpayers find themselves in unique situations that require a deeper understanding of the tax code to avoid unexpected liabilities. Below, we discuss eight common reasons you might owe more taxes than anticipated and share insights on better strategizing for the future.

Working in Another State

If your job takes you across state lines, navigating taxes can get tricky and might increase the amount you owe. States each set their own tax rules and rates, so if you work and live in different states, you’re likely facing unique tax requirements in each. This situation often necessitates filing tax returns in multiple states, potentially increasing your overall tax liability. This scenario is quite common for those living in one state but working in another.

Thankfully, many states offer tax credits or have reciprocal agreements with neighboring states to prevent individuals who work across state lines from paying taxes twice on the same income. But if there is no reciprocity agreement between states or available tax credits, you could find yourself taxed by both states, adding to your tax obligations.

Insufficient Withholding

The information you provide on your Form W-4 determines tax withholdings from your paycheck. If too little was withheld throughout the year (maybe you claimed the wrong number of dependents or your financial situation changed), you could find yourself with a tax bill at filing time.

Multiple Income Streams

If you have more than one source of income, such as freelance work, rental properties, or investments, the taxes withheld from your primary job may fall short of your combined tax obligation. Each income source could have its own tax implications, leading to a shortfall when it’s time to settle up with the IRS.

Changes in Personal Circumstances

Significant life events, such as marriage, divorce, changes in employment status, the birth of children, or even children reaching adulthood can impact your tax liability. Failing to adjust your withholding or account for these changes can result in owing taxes at the end of the year.

Tax Credits and Deductions

While tax credits and deductions can reduce your taxable income and overall tax liability, claiming too many allowances or overestimating your deductions can lead to owing taxes. Additionally, changes in tax laws or the phase-out of certain credits or deductions can catch taxpayers off guard.

Bonuses and Windfalls

Extra income, such as bonuses, commissions, inheritances, or lottery winnings, can nudge you into a higher tax bracket, resulting in a larger tax bill than anticipated. Since these sources of income are often taxed differently than regular wages, it’s essential to plan accordingly to avoid surprises come tax time. Let your tax professional know if you receive any unexpected windfalls so they can advise you on how much you should set aside for the IRS.

It’s important to note that bonuses are not taxed at a higher rate than other income; however, they may be subject to different tax withholding rules, which can sometimes make it seem like they are taxed at a higher rate. The IRS typically considers bonuses to be supplemental income and subjects them to a flat withholding rate for federal income tax rather than your usual withholding rate. This flat rate is often higher than the regular tax rate for your salary or wages.

Self-Employment Taxes

If you’re self-employed or working as an independent contractor, you’re responsible for paying income and self-employment taxes (i.e., Social Security and Medicare taxes). Unlike traditional employees, whose employers contribute half of these taxes, self-employed individuals are responsible for the full amount. Failure to set aside enough money to cover self-employment taxes throughout the year can lead to a hefty tax bill. A competent tax advisor will be able to guide you on what you should be sending to the IRS quarterly.

Underpayment Penalties

In addition to owing taxes, if you didn’t pay enough throughout the year (either through withholding or estimated tax payments), you may also face underpayment penalties, which add to your tax bill. To avoid added penalties, work with your tax advisor and financial advisor on proactively forecasting gains and paying estimated taxes quarterly.

Empower Your Tax Planning

Navigating the complexities of the tax system can be daunting, but being aware of these common reasons for owing money can help you better prepare and manage your finances throughout the year. Consulting with a financial advisor or tax professional can help you make informed decisions to take advantage of all available tax-saving opportunities. With proper planning and understanding, you can minimize surprises and take control of your tax situation with confidence.

Ready to optimize your tax strategies? Schedule a free consultation with us today, and let’s explore how you can maximize your tax-saving opportunities and secure a brighter financial future.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Selling Your Home? Don’t Get Blindsided by Capital Gains Tax

Over the past few years, property values have soared. Homeowners around the country and in the most desirable New York Tri-State areas have experienced the thrill of competitive offers. Even if you had no plans to sell, watching your neighbors cash in, checking Zillow, or fielding unsolicited inquiries from aggressive buyers and agents may have piqued your interest.

But a word of caution: the excitement of navigating a real estate market in an era where homes fetch record prices can leave you vulnerable to emotional whims. While it’s possible that selling your home could be a lucrative opportunity, it’s prudent to consider every potential drawback before making a move.

When sellers are eager to access the proceeds of substantial equity returns, there’s one big ‘gotcha’ in particular that often escapes their attention: capital gains tax. The exhilaration of a high-value sale is undeniable, but don’t forget that the IRS will expect their share. You may be thinking, ‘So what if I have to give up a percentage of a windfall I wasn’t expecting?’ But knowing the rules and planning for them means you may be able to avoid paying more than necessary.

While the potential of paying capital gains tax shouldn’t prevent you from selling your home, it would be smart to become familiar with its intricacies. If you empower yourself with the knowledge of what to expect, you may be able to save some money and leverage your financial wins to your benefit.

Here’s what you should know to avoid being blindsided by an unexpected tax bill.

What Are Capital Gains Taxes?

Capital gains taxes are the taxes you must pay on the income you make from profit on an investment. If you sell your house for more than you paid, you can guarantee the IRS will want a cut. But the amount due depends on more than a simple calculation; it depends on your taxable income, filing status, and how long you owned the home (or other investment) before selling it.

To further complicate matters, every capital gains scenario is different.

Short-term capital gains, applicable if you held the property for a year or less, mirror your regular income tax rate and are dictated by your tax bracket. In this case, if possible, the ideal strategic move would be to sidestep short-term gains.

Long-term capital gains, on the other hand, offer more favorable taxation. Owning the property for over a year qualifies you to pay the long-term capital gains rate of 0%, 15%, or 20%, depending on your income and filing status.

It’s also important to note that in addition to capital gains tax, you may also have to pay state income tax on the profits, depending on your state’s tax laws.

Do You Qualify for a Capital Gains Exclusion?

Thanks to specific IRS exclusions, you can sometimes avoid excessive capital gains tax when selling your main residence. If you’re single, you can exclude up to $250,000 of capital gains from your taxes when selling a home. For married couples filing jointly, this exclusion doubles to $500,000. Keep in mind, though, that you can only use this exemption once every two years.

Understanding and leveraging capital gain exclusions can significantly boost the financial rewards of selling your property. It’s a tax-saving strategy that allows you to pocket a significant portion of your home sale profits without excessive burden.

Unfortunately, the exclusion doesn’t apply to every situation.

Unlocking the capital gains exclusion hinges on meeting all of these requirements:

First and foremost, your house must have been your primary residence.
You owned the property for more than two years
You lived in the home for at least two years in the five-year period before the property is sold
The property wasn’t obtained through a 1031 exchange (i.e., ‘like-kind exchange’) transaction.
In the past two years, you haven’t utilized the capital gains exclusion for any other residential property.

Familiarizing yourself with these qualifiers is essential, as they delineate the scope of the exclusion and influence your ability to leverage its benefits during the sale of your property.

Understanding Capital Gains Scenarios

To help you better understand how various capital gains situations can play out, here are a few “real-life” examples. These stories showcase how a nuanced understanding of these intricacies can wield remarkable financial impacts on each seller’s life.

Scenario #1: Small Business Owner Avoids Capital Gains After Renting Out Her Condo

Courtney, who owns a successful small business, purchases a new condo for $300,000. She lives in it for a year and decides that she would like to move to a different neighborhood. Instead of selling her condo, she finds a couple to rent it. After three years, the couple moves out, and Courtney returns to her condo. She lives there for another year and decides to sell it. She sells it for $500,000 – a $200,000 profit. Because Courtney lived in the condo as her primary residence in two out of the last five years, and the profit did not exceed the $250,000 exclusion amount, no capital gains tax is due.

Let’s consider an alternate ending to Courtney’s story. Instead of moving back in after the tenants move out, Courtney decides to sell. At this point, she would have owned the condo for four years but only lived in it as her primary residence for one year. Because she did not meet all the exclusion requirements, but did at least own the home for over one year, she would have to pay long-term capital gains on her $200,000 profit. Depending on her tax bracket, this would cost her between $10,000 and $40,000—cash that she could have kept if she had lived in the home for one more year before selling.

Scenario #2: Grandparents’ Exclusion Nets 35% Tax Savings

Mario and Lisa are an older couple who have lived in their home for over 40 years. The neighborhood has changed dramatically, and they want to be closer to their children and grandchildren, so they decide to sell. They originally purchased their home for $80,000, now worth $1,500,000.

The total profit on the home sale is $1,420,000. As a married couple who files their taxes jointly, they qualify for the $500,000 exclusion. They will owe long-term capital gains only on $920,000 ($1,420,000 – $500,000), a more than 35% savings.

Scenario #3: Married Couple Makes a Costly and Preventable Capital Gains Misstep

Joseph and Olive are a young married couple living in the city and making a good living. During the pandemic, they decided they wanted to get out of the city for more space. They end up selling their condo, which they purchased for $300,000 five years ago, for $600,000. They do not owe any capital gains tax because the profit of $300,000 is under the $500,000 exclusion threshold. They find a home in the suburbs near the city for $550,000.

After nine months of living in their new home, they realize that the suburbs aren’t for them and want to return to the city. Because their neighborhood is so desirable, they are told they can sell their home for $700,000, $150,000 more than they paid less than a year ago. They decide to list, and the house sells almost immediately. Joseph and Olive think that no taxes will be owed because they lived in it, AND their profit is under the $500,000 threshold.

However, they cannot use the exclusion on this sale because they used it on the condo within the last two years. Not only that, they also owned the property for under one year, so they will have to pay short-term capital gains instead of long-term. The $150,000 will be taxed at their ordinary income tax rate on top of their other joint income of $300,000. Adding the $150,000 to their joint income would place them in the 28% federal tax bracket, meaning they would owe about $42,000 in taxes on their profits.

Let’s look at some alternatives Joseph and Olive could have taken. For starters, if they waited just three months to sell the home, they would have paid long-term capital gains rates (15%) on the $150,000 profit for a tax of “only” $22,500. This alone would have saved them $19,500 over the short-term capital gains tax.

If they could wait an additional 15 months to sell the home, they would have qualified for the exclusion again and paid no capital gains tax.

Of course, neither of these alternatives take into consideration whether the real estate market would have allowed them to sell their home for the same amount months later, but having all the facts about capital gains taxes can only help when deciding if and when to sell.

Scenario #4: Savvy Real Estate Investor Carefully Considers His Options

Jon is a contractor who flips houses on the side. He finds a great deal on a property in an up-and-coming neighborhood. He purchases the property for $350,000 and puts about $100,000 of work into it over six months. The property is now valued at $700,000; this would mean a profit of $250,000 ($700,000 – $450,000). Here are two possible outcomes for Jon’s sale:

Ending A: Jon sells the property for $700,000 and owes short-term capital gains on the $250,000 profit. He does not qualify for any exclusion because it is an investment property.

Ending B: Jon finds a tenant to rent the property for a year. The rent he receives covers his monthly costs (mortgage, taxes, etc.). After the tenant moves out, Jon would have owned the property for 18 months. He would now pay long-term capital gains on the profit of $250,000. Jon may also have the opportunity to utilize a 1031 exchange and invest the proceeds of this sale into another like-kind property without paying capital gains tax, thus deferring the taxes to a later date.

(A 1031 exchange is a swap of one real estate investment for another that allows for capital gains to be deferred. There are certain rules and requirements that one must meet to qualify, including owning the property for at least one year, so it is best to discuss this with your tax, financial and legal advisors prior to engaging in this type of transaction.)

By holding the property just a little longer, Jon can save thousands of dollars in capital gains taxes. He also may be able to defer taxes further. As with our young married couple, Jon also needs to consider whether he could still sell for $700,000 if he waits another year or if it makes more sense to sell while the market is hot.

Scenario #5: Advanced Tax Savings Strategy for Sophisticated Investors

James and Keith are a wealthy couple with many different investments in their portfolio. They own several investment properties and would like to sell one that they can get a great price on due to rezoning in the area. They sell the property and make a profit of $500,000. Since these are investment properties, the exclusion does not apply, so they will pay long-term capital gains on the profit.

However, since the stock market is having a rough year, they look at their stock portfolio and notice a large unrealized loss of $400,000 in one of their stocks. They sell the stock, take a long-term loss of $400,000, and reinvest the proceeds into a different stock within the same industry inside their portfolio.

Now, here is where it gets fun. They can use the $400,000 loss to offset the $500,000 gain from the property sale, meaning they have a net capital gain of $100,000! So now they owe long-term capital gains on $100,000 instead of $500,000.

Additional Capital Gains Strategies to Consider

All of this may seem overwhelming, but you don’t have to memorize the details; you simply must know every action must be carefully considered. Don’t underestimate the nuances of capital gains and all the varied possible outcomes. Before parting with a property that has appreciated, it’s imperative to factor in all relevant considerations.

One often underestimated strategy to reduce capital gains is elevating your home’s cost basis through documented home improvements and repairs.

By boosting your recorded costs, you reduce your profit and minimize the capital gains tax liability. Consider Mario and Lisa’s scenario from earlier. Had they diligently tracked receipts for their home’s upkeep and enhancements over the past four decades, they could have augmented their cost basis by a substantial $200,000, significantly mitigating their tax liability upon sale.

Another essential presale exercise, particularly for those in their later years, is contemplating your legacy.

Analyze your asset portfolio to determine what you’ll pass down to your heirs. In the realm of taxation, real estate can be a valuable asset to bequeath. The reason lies in the step-up in cost basis that heirs receive upon inheriting the property.

Again, think of Mario and Lisa. What if they opted not to sell their home, choosing instead to leave it to their children? Upon their death, the home’s fair market value is appraised at $1,500,000. When their children eventually sell it for the same amount, they owe zero capital gains tax because there’s been no profit in their possession ($1,500,000 cost basis – $1,500,000 sale = $0). This is because the children will receive a step up in cost basis when they inherit the home after their parents pass.

Learn the Rules and Play with Caution

Understanding the dynamics of capital gains can be a game-changer. Capital gains tax rules can have a substantial impact on your wealth management. A comprehensive grasp of the intricacies empowers confident and strategic navigation of real estate transactions. Exploring various options, implementing tax savings strategies, and avoiding costly mistakes can make a significant difference.

When it comes to making complex financial decisions, it’s crucial it is to have expert guidance. That’s why we encourage you to seek the insights and support of our experienced financial planners and other qualified professionals like CPAs and tax and estate attorneys. Let us be your compass, guiding you on a successful and informed financial journey. Contact Strata Capital today, and let us help make your complex decisions simple.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

The information contained above is for illustrative, educational, and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.

Cornerstone Planning Group, Inc., (“CSPG”) is an SEC-registered investment advisory firm. The information contained herein should not be construed as personalized investment advice and should not be considered as a solicitation for investment advisory service. The information (e.g., tax ) provided is believed to be accurate however CSPG does not guarantee or otherwise warrant such information. For more information regarding CSPG you can refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov) and review our Form ADV Brochure and other disclosures.