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Mix & Match

Updated: Oct 15, 2020

When exploring strategies to defer, mitigate, or reduce tax liabilities, we hear a common objection on tax rates potentially being higher in the future. While it is true that we do not know what the future entails for tax policy, that objection confirms the belief that many taxpayers explore tax strategies through a siloed or exclusive approach. A more holistic approach explores how parts of the tax code can work in tandem to provide the most significant benefit to the taxpayer.

One tax strategy currently discussed with clients is taking advantage of Qualified Opportunity Zones (QOZs). When a taxpayer invests their gains in a QOZ in 2020, they defer taxes (on today's gain) through 2026, reduce the tax liability on that gain, and eliminate the taxes on future earnings. The long-term benefits are attractive, but taxpayers balk at still owing taxes triggered in 2026.

When reviewing all possibilities collectively, taxpayers may discover they have up to six years to offset the deferred gain from the QOZ. Since a taxpayer invests only their gain in the QOZ, the basis can utilize a tax-loss harvesting strategy. The objective in combining both QOZ and tax-loss harvesting is to have accumulated losses offset the deferred capital gains - possibly negating any tax liability.

Combining strategies in this situation creates an investment portfolio with more capital working for the taxpayer. Advantage Wealth Solutions reviews multiple approaches with each client to achieve an optimal solution unique to them. Mixing & Matching strategies might even eliminate what you owe.


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