517 | Maximize Your Wealth: Understanding Capital Gains Tax Strategies | With Cody Garrett

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Brad Barrett | Choose FI Media

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4.8 • 5K Ratings

🗓️ 21 October 2024

⏱️ 54 minutes

🔗️ Recording | iTunes | RSS

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Summary

Maximize Your Wealth: Understanding Capital Gains Tax Strategies | With Cody Garrett

This episode dives into the strategy of capital gains harvesting, explaining how it can help individuals minimize taxes on investments and potentially realize tax-free income. We break down how this approach fits into financial independence planning, including key comparisons between capital gains and ordinary income, real-life scenarios, and important health insurance considerations for early retirement.

What strategies can you use to reduce your tax burden during retirement?
How can understanding capital gains impact your long-term financial decisions?
What role does income management play in health insurance planning for early retirement?

Chapter Markers:

[00:00:00] Introduction to Capital Gains Harvesting
[00:01:38] Understanding Income Tax and Capital Gains
[00:05:22] Tax Rate Comparisons: Ordinary vs. Capital Gains
[00:20:07] Real-Life Case Studies
[00:49:34] Key Takeaways and Best Practices

Key Takeaways:

Understand your capital gains tax rates to optimize when to sell investments.
Use capital gains harvesting to realize profits without tax penalties.
Plan retirement income carefully to maintain eligibility for health insurance subsidies.

Links & Resources:

Transcript

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0:00.0	Hello and we have another deep dive on a really fascinating topic which is capital gains harvesting so tax gain harvesting in essence And we first talked about this way back in April of 2017
0:17.1	in episode 18 R.
0:19.0	And this is one of our most downloaded episodes of all time and frankly we just covered it in
0:24.5	passing we didn't even give it our full in-depth analysis but that changes today
0:28.7	so I asked my good friend Cody Garrett who's a CFP from the website Measure Twice Money.
0:34.6	He was recently on in our first of these fun deep dives in episode 503, where we talked
0:40.5	about the Roth IRA conversion ladder, which is yet another one of those fundamental
0:45.2	financial independence strategies that can really help us. And I think capital gains harvesting
0:50.4	that we're going to talk about today is one of the most fascinating things where there is this way to essentially get free money so tax-free capital gains and it's actually much more significant than you would otherwise anticipate.
1:05.9	I wrote about this in my newsletter in July and August and there was such interest that I knew
1:11.2	I had to put an entire episode together and that is today.
1:14.9	So without further ado, you're really going to enjoy this.
1:18.3	Get a pen and paper and this one is really going to be valuable that I can assure you.
1:23.4	With that, welcome to choose up fine.
1:25.7	CODI, this is going to be fun. I've been looking forward to this since the second we
1:36.7	scheduled it. This is going to be great. Ready to continue nerding out, let's go for it.
1:40.0	Oh, I love these deep dives. I love it. It speaks to my soul. So, okay, let's just start capital gains harvesting. What is this?
1:48.2	So first we have to kind of, it's like, you know, before you get on the plane, like, where are what are we talking about where's the destination so first we have to understand income tax
1:56.7	first of all we're not going to spend like 30 minutes talking about like the income tax formula
2:01.6	let's break out the IRC and go to town, right? But I do want to kind of start with this idea again without going into self-employment and AMT and some of these you know QBI and all these really interesting things that you can you know Google maybe a future episodes
2:17.6	Sean Malaney's an awesome friend of mine really a tax nerd too so we're all here to help. But I do want to, let's just break down very simply that there's two types of
2:26.3	income that you're probably going to see on your tax return and you might not have realized that they're separate. One is called just ordinary income. Ordinary income, most of you are
	...

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