Capital Gains Tax 101: What Every Investor Needs to Know

A capital gain occurs when you sell an asset for more than you paid for it. The gain is the difference between your cost basis and your sale price. Capital gains can arise from the sale of real estate, stocks, business interests, or other assets — and not all gains are taxed the same way.

Short-Term vs. Long-Term Gains

Short-term capital gains apply to assets held for one year or less. These gains are taxed as ordinary income — at the same rates as your wages — which can be as high as 37% for high-income earners.

Long-term capital gains apply to assets held for more than one year. These gains receive preferential tax treatment, currently taxed at 0%, 15%, or 20% depending on income. High-income earners may also owe an additional 3.8% Net Investment Income Tax.

Depreciation Recapture

For real estate investors, depreciation recapture is an important concept. When you sell a depreciated property, the IRS requires you to recapture some of that depreciation as taxable income — at a rate of up to 25%.

This is separate from capital gains tax and can significantly increase the total tax bill on a real estate sale if not addressed in the planning process.

Strategies to Reduce Capital Gains Taxes

•       Hold assets longer than one year to qualify for long-term rates.

•       Harvest losses to offset gains in other positions.

•       Complete a 1031 exchange when selling investment real estate to defer the gain indefinitely.

•       Invest gains into a Qualified Opportunity Fund to defer and potentially eliminate tax on future appreciation.

•       Gift appreciated assets to charity through a Donor Advised Fund or Charitable Remainder Trust.

•       Plan the timing of sales to manage which tax year gains are recognized.

Why Planning Early Matters

Most capital gains tax reduction strategies must be implemented before or at the time of sale — not after. Once an asset is sold and proceeds are received, many of the most effective options are no longer available.

Working with your CPA and investment advisor before a sale — not after — is what makes the difference.

How True North Private Investments Helps

At True North Private Investments, we help accredited investors implement tax-aware strategies — including 1031 exchanges, Qualified Opportunity Zone investments, and Delaware Statutory Trusts — that directly address capital gains exposure. We work alongside your CPA to ensure every strategy is coordinated with your overall tax picture.

Final Thoughts

Capital gains taxes are not inevitable — they are manageable. The investors who pay the least are not the ones who earn the least. They are the ones who plan the most.

Schedule a conversation with True North Private Investments to discuss your capital gains situation.