Capital Gains: Pay Less with These IRS-Approved Moves

Introduction

Investors and business owners frequently face the sting of capital gains taxes, which can erode portfolio returns and diminish wealth-building efforts, especially in a dynamic market. Inexperienced tax advisors often overlook sophisticated strategies, leaving clients overpaying on gains or missing opportunities to defer or eliminate taxes. Are you leveraging the latest IRS-approved moves to minimize your capital gains tax in 2025?

At Kewal Krishan & Co, our expert tax advisors help clients save an average of $50,000 annually, potentially totaling $1 million over a decade through strategic tax planning. This blog explores proven methods to reduce capital gains taxes in 2025, backed by Internal Revenue Code (IRC) provisions and enhanced by the One Big Beautiful Bill Act (OBBBA), signed July 4, 2025. With detailed examples and compliance steps, we cover Qualified Small Business Stock (QSBS), Opportunity Zones, and other tactics to keep more of your gains. Start optimizing your portfolio now with insights from Our Tax Planning Services.

Top IRS-Approved Moves to Reduce Capital Gains Taxes in 2025

Capital gains are taxed at 0%, 15%, or 20% for long-term holdings (over one year) under IRC § 1(h), plus a 3.8% Net Investment Income Tax (NIIT) for high earners (IRC § 1411). OBBBA preserves these rates while enhancing specific provisions. Below are key strategies, reported on Form 8949, Schedule D (Form 1040), or Form 8997.

1. Qualified Small Business Stock (QSBS) Exclusion

Under IRC § 1202, non-corporate taxpayers can exclude up to 100% of gains (up to $15 million or 10 times basis for stock acquired post-July 4, 2025) from selling QSBS held five years, issued by C corporations with assets under $75 million.

2. Opportunity Zone Investments

Reinvest capital gains into Qualified Opportunity Funds within 180 days to defer taxes until December 31, 2030, with potential exclusions for 10-year holdings under IRC § 1400Z-2.

3. Tax-Loss Harvesting

Sell securities at a loss to offset gains and up to $3,000 of ordinary income annually under IRC § 1091, reported on Form 8949 and Schedule D.

4. Charitable Donations of Appreciated Assets

Donate appreciated securities to qualified charities under IRC § 170, avoiding capital gains tax and claiming a deduction up to 30% of AGI, reported on Schedule A.

5. 1031 Like-Kind Exchanges

Defer gains on real property by exchanging for like-kind property under IRC § 1031, reported on Form 8824. OBBBA retains this for real estate, not personal property.

For comprehensive guidance, see IRS Publication 550.

Detailed Example: Minimizing Capital Gains Tax

Consider an investor with $1.2 million in 2025 taxable income, including $500,000 in long-term capital gains from stock sales, in the 20% bracket with NIIT.

• QSBS Exclusion: $200,000 gain from QSBS (post-July 2025, basis $20,000) excluded under IRC § 1202, saving ~$47,600 (20% + 3.8%).
• Opportunity Zone: Reinvests $100,000 gain into a Qualified Opportunity Fund, deferring ~$23,800 tax until 2030.
• Tax-Loss Harvesting: Sells $50,000 in losing stock, offsetting $50,000 gain, saving ~$11,900.
• Charitable Donation: Donates $50,000 appreciated stock (basis $10,000), avoiding $9,520 gain tax and claiming $50,000 deduction, saving $12,000 (24% bracket).
• 1031 Exchange: Exchanges $100,000 gain from rental property, deferring ~$23,800 tax.

Remaining $100,000 gain taxed at $23,800 (20% + 3.8%). Total savings: ~$108,700, with $47,600 deferred.

Alternative Scenario

Without QSBS or Opportunity Zone, taxable gains rise to $400,000, incurring $95,200 tax, reducing savings to $13,420—a $95,280 difference.

Step-by-Step Guide for Taxpayer Compliance

To implement these strategies and ensure IRS compliance, follow these steps:

1. Review Portfolio: Identify gains, QSBS eligibility, and loss opportunities per IRC § 1202, § 1091.
2. Verify QSBS: Confirm post-July 4, 2025 acquisition, five-year hold, and $75 million asset cap; retain stock records.
3. Execute Opportunity Zone Investment: Reinvest gains within 180 days, report on Form 8997.
4. Conduct Tax-Loss Harvesting: Sell losses, avoiding wash sales (repurchasing within 30 days, IRC § 1091).
5. Donate Assets: Transfer appreciated securities to charities, obtain appraisals, report on Schedule A.
6. Complete 1031 Exchange: Use qualified intermediary, identify replacement property within 45 days, close within 180 days; file Form 8824.
7. File Returns: Submit Form 1040 with Schedules D, A, and Forms 8949, 8997, 8824 by April 15, 2026, or extend with Form 4868.
8. Retain Records: Keep brokerage statements, appraisals, and exchange documents for three years (IRC § 6001).

For international investments, explore Our Cross-Border Tax Services.

Common Pitfalls to Avoid

• QSBS Ineligibility: Ensure active business and holding period compliance (IRC § 1202).
• Wash Sale Violations: Avoid repurchasing identical securities within 30 days (IRC § 1091).
• 1031 Timing Errors: Miss 45/180-day deadlines, triggering taxable gain (IRC § 1031).
• Donation Overvaluation: Use qualified appraisals to avoid penalties (IRC § 170).

Why Work with a Tax Expert?

Navigating 2025’s capital gains strategies under OBBBA requires precision to maximize exclusions, deferrals, and deductions while avoiding audits. Generic advisors may miss QSBS qualifications or 1031 complexities, costing thousands. Kewal Krishan & Co crafts tailored plans under IRC provisions, ensuring compliance and optimal savings. Our expertise mitigates risks, as highlighted in Our Tax Litigation Services.

Conclusion

In 2025, IRS-approved moves like QSBS exclusions, Opportunity Zones, tax-loss harvesting, charitable donations, and 1031 exchanges offer robust opportunities to minimize capital gains taxes, amplified by OBBBA’s enhancements. Strategic timing and meticulous documentation are critical to realizing these benefits. Don’t let unoptimized taxes erode your wealth—implement these strategies before year-end to enhance your portfolio’s after-tax returns.

Call to Action

Schedule a consultation with Anshul Goyal, CPA EA FCA, a licensed U.S. CPA and Enrolled Agent, admitted to practice before the IRS, specializing in tax litigation and cross-border tax for U.S. businesses and Indians in the U.S. Contact us at Kewal Krishan & Co to reduce your capital gains taxes.

About Our CPA

Anshul Goyal, CPA EA FCA, is a licensed U.S. CPA and Enrolled Agent, representing clients in IRS tax litigation and assisting with cross-border tax compliance for U.S. businesses and Indians in the U.S. His expertise ensures tailored strategies that maximize savings and ensure compliance.

Disclaimer

This blog provides general information for educational purposes only and does not constitute tax, legal, or financial advice. Tax laws change frequently, and individual circumstances vary. Consult a qualified tax professional before making decisions. The author and firm disclaim liability for actions taken based on this content.

FAQs

1. What’s the QSBS exclusion in 2025?

Up to $15 million gain exclusion for post-July 4 stock (IRC § 1202).

2. How do Opportunity Zones save taxes?

Defer gains until 2030 with potential exclusions (IRC § 1400Z-2).

3. What’s tax-loss harvesting?

Offset gains with losses, up to $3,000 ordinary income (IRC § 1091).

4. Can I deduct donated stock?

Yes, up to 30% AGI, avoiding gains tax (IRC § 170).

5. How does a 1031 exchange work?

Defers real property gains via like-kind exchange (IRC § 1031).