6 Mid-Year Planning Tips to Get Ahead of Capital Gains Taxes

As we hit the halfway mark of the year, it’s a good time to revisit your investment portfolio—not just to evaluate performance, but to plan ahead for capital gains taxes.

Whether you’ve already sold assets or are considering changes later in the year, a few well-timed moves now can help minimize your tax burden and allow you to keep more of your investment gains.

Here are six mid-year strategies to help you stay ahead of capital gains taxes:

1. Know What Triggers a Capital Gain (and What Doesn’t)

Capital gains occur when you sell or transfer a capital asset—like stocks, mutual funds, real estate, or collectibles—for more than your adjusted basis (typically what you paid, adjusted for improvements or depreciation).

But not all gains are taxable:

Investments inside tax-advantaged accounts (IRAs, 401(k)s, HSAs, 529 plans) generally aren’t taxed until withdrawal, or not at all.
Gains on your primary residence may be partially or fully excluded.

Understanding where your assets fall helps you focus on what needs attention during your mid-year review.

2. Harvest Losses to Offset Gains

Have a few underperforming investments? Mid-year is a good time to consider tax-loss harvesting, which is selling losing positions to offset gains elsewhere in your portfolio.

Here’s how it works:

Short-term losses can offset short-term gains (which are taxed at higher ordinary rates) and long-term gains (which are taxed at more favorable rates), and long-term gains can offset short-term gains.
If losses exceed gains, you can deduct up to $3,000 of net losses from ordinary income and carry forward the rest indefinitely.

Be careful of the wash sale rule, which disallows a loss if you buy the same or a “substantially identical” asset within 30 days before or after the sale.

3. Time Your Sales to Maximize Tax Efficiency

One of the most powerful (and often overlooked) tax tools is the holding period:

Short-term capital gains (assets held one year or less) are taxed at your regular income rate—up to 37% (40.8% when including the Net Investment Income Tax [NIIT]).
Long-term capital gains (assets held more than one year) get favorable tax rates of 0%, 15%, or 20%, depending on your income.

If you’re close to the one-year mark on an asset, waiting a few weeks or months could significantly lower your tax bill.

4. Watch Out for Mutual Fund Capital Gains Distributions

Even if you didn’t sell any shares, mutual funds can still distribute capital gains, often near the end of the year. These distributions are passed on to shareholders and can increase your tax bill unexpectedly.

Be sure to give yourself a fall reminder to check whether your fund is likely to distribute large gains this year, so you have time before year-end to consider your options.

5. Plan for the Net Investment Income Tax (NIIT)

High-income investors should keep an eye on the 3.8% NIIT, which applies to:

Individuals with Modified Adjusted Gross Income (MAGI) over $200,000
Married couples filing jointly with MAGI over $250,000

NIIT applies to the lesser of your net investment income or the amount your MAGI exceeds the threshold.

Mid-year is a good time to review your MAGI projections. If you’re approaching the threshold, managing gains now can help you stay below it or create a plan for it.

6. Consider the Bigger Picture of Adjusted Gross Income (AGI) Impact

Recognizing a large capital gain doesn’t just mean paying capital gains tax; it could also push up your AGI, triggering:

Higher Medicare premiums
More of your Social Security income becoming taxable
Exposure to phaseouts on deductions, credits, and other benefits

That’s why timing your gains—and recognizing losses when available—is so important. Mid-year offers flexibility to adjust without the pressure of year-end deadlines.

Mid-Year Is Prime Time for Capital Gains Planning

Proactive planning now gives you time to make strategic decisions that could reduce your 2025 tax bill. Whether it’s harvesting losses, holding off on sales, or rebalancing tax-smartly, a mid-year check-in can make a big difference.

If your portfolio includes appreciated assets or you expect a large transaction later this year, talk with a financial advisor or tax professional. With a little foresight, you can make capital gains work in your favor—not against you.

Beacon Hill Private Wealth is an independent, fee-only, fiduciary investment advisor providing evidence-based wealth planning solutions that simplify our clients' financial lives. We serve clients across the country.

Founder Tom Geoghegan, CFP®, CIMA®, CPWA®, RMA® is also a member of the National Association of Personal Financial Advisors (NAPFA), the Financial Planning Association (FPA), and featured on the Fee-Only Network.

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This is for informational purposes only. Tax information as of June 2025 and may be subject to change. The content does not purport to present a complete picture, but Beacon Hill Private Wealth believes the information is representative of issues and needs facing some clients and why they may seek this service. This should not be construed as specific investment, tax, or legal advice. Individuals should seek advice from their wealth advisor or other advisors before undertaking actions in response to the matters discussed. No client or prospective should assume the above information serves as the receipt of, or substitute for, personalized individual advice.

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