If there’s one mantra every investor is taught to live by, it’s buy low, sell high. But what happens when you sell high and encounter capital gains? This is a major tax bite. As of 2025, short-term capital gains (for assets held for less than one year) have preferential rates between 10% and 37% based on your income and filing status.
While there are numerous ways to minimize capital gains, many investors make mistakes and end up paying unnecessary tax payments. Understanding these common mistakes and implementing strategic solutions is the way to success. Let’s get in!
Not Understanding the Rules
Lack of proper research is one of the most common reasons investors aren’t able to minimize capital gains. Experts recommend the following four general investment strategies that minimize your tax burden:
Hold assets long term
As hinted earlier, short-term assets sold (held for one year or less) are taxed up to 37%. To minimize this, you should hold assets for more than one year. As a result, you will qualify for lower long-term capital gains tax rates, which can be 0%, 15%, or 20% (more on this later).
Utilize tax loss harvesting
Another qualified way to minimize capital gains is to sell investments at a loss. This will offset your capital gains from other sales. You can learn more tax harvesting rules to ensure minimal capital gains.
Invest in tax-advantaged accounts
Investing in accounts like 401(k)s, Traditional IRAs, or Roth IRAs makes your money grow and be sold without triggering immediate capital gains taxes.
Ignoring Timing for Selling Assets
Timing is a key factor when it comes to minimizing capital gains. No one’s stopping you from selling your assets for a gain, but do it strategically.
If possible, sell assets after at least one year of holding them. Make sure to monitor the purchase date and consider the tax implications. Moreover, if you expect to be in a lower tax bracket in the coming years (during retirement or a career break), postpone selling some assets till then.
Best case scenario? You will fall into a lower capital gains tax bracket — potentially 0% for long-term gains.
Overlooking Advanced Capital Gain Considerations
Did you know you can minimize capital gains by going just one extra mile? One method is making charitable contributions.
Consider donating appreciated assets to a registered charity, and you can gain a double benefit:
- Avoid capital gain on the appreciation
- Claim a tax deduction
That said, make sure you stick to the guidelines mandated by your state’s tax laws.
Not Consulting With a Wealth Management Advisor
Let’s be real — understanding the ins and outs of capital gains tax (GST) is not a walk in the park.
As an investor with a diverse portfolio and multiple income streams to manage, it can be hard to learn strategies to minimize capital gains. Consider working with a wealth management advisor to get personalized services. A reliable wealth management agency like Creative Planning will understand your financial goals and suggest the best course of action.
