Published Aug. 08, 2025 01:24AM EDT
Deferring Capital Gains
Need ideas for deferring capital gains from the sale of stock, crypto, or other property? A common question is what options are there for either avoiding or deferring the tax on those gains. Some of the options are outlined below.
Self-Employed Retirement Savings
If you are self employed, taking advantage of retirement savings options can be an effective way to defer capital gains taxation. In 2025, the total limit for self-employed plans such as a SEP or solo 401(k) is $70,000. These accounts can be opened with your financial advisor or most major financial institutions. Placing money in these accounts will reduce your self employment income, which will lower your self-employment tax as well as adjust gross income.
Do not have self-employment income? Discuss with your tax advisor whether any of the revenue you receive in the year can be treated as Schedule C self-employment income. Many people involved crypto, for example, receive considerable referral incomes / “bonuses” that needs to be reported and can be reported as Schedule C income. This can serve as your basis to make retirement contributions that offsets this income and some of your capital gains.
Deferring Capital Gains through Qualified Opportunity Funds
The 2017 tax bill created a tax deferment opportunity through qualified opportunity funds (link). These are funds that invest in areas needing economic development. Their unique feature is that if you invest capital gains in one of these funds within 180 days of realizing the gain, you do not pay taxes on the gain in that year.
For example, imagine you have obtained a $100,000 gain. You then place half in a qualified opportunity fund and keep the rest. In the year of the gain, you will pay taxes on only $50,000 of the gain. The other half is taxed only when you take it out of the fund. Indeed, if you wait, the IRS gives you tax discount benefits: 10 percent for 5 years, 15 percent for 7 years, and 100 percent for 10 years. That can be a real tax savings!
You can use this program to spread out realization of the savings. I had a client with over $1 million in gains. We created a plan to avoid the 20 percent capital gain tax rate by spreading realization of that gain over several years.
It is worth noting that this program expires in 2026. Congress appears headed to renewing it, but we will not know until the final legislation is passed.
Deferring capital gains requires advance tax planning. Mid-Atlantic Law & Tax PLLC regularly helps clients work develop these plans. Please reach out to set a time to discuss your situation and how we can help.
