When possible, I generally like to defer big end of the year sales to the following year for tax purposes. I am not a tax expert or even a fake tax expert, but I liked the idea of not having to pay taxes on a sale until the following year, so I always just assumed it was better to move a large November/December deal to January.
I read an article posted on Sedo and written by noted CPA and domain tax expert Sandra Brooks, author of the Domain Tax Guide (affiliate link). One very interesting nugget stands out from the article that was surprising to me, and it may change the closing date of a sale I have pending.
According to Brooks,
“Your best strategy may be to presume that the rates will go up, especially if you are in a higher tax bracket. You should lean toward selling domains now versus next year if the terms otherwise make sense. You may also want to defer deductions as they will become more valuable if the tax rates increase.”
As with all tax guidance and advice, it’s always best to speak with your own accountant who knows your business and financial situation. Because of seeing this article, it will give me something to ask my accountant, since I would have just assumed it would be smarter to close the sale in January.
This really depends on how you treat your domain business from a tax stand point as well as when you purchased your name. If you are a long term holder and a rare seller (like us) you may depreciate your names over x years and treat your occasional sale as a Long Term taxable event in which case it would make sense to sell this year however, if you are a flipper and hold for under 1 year it most likely doesn’t matter if you sell in December or January since you are paying standard income taxes (or short term cap gains)
We are NOT accountants so certainly check with your CPA to evaluate your own tax strategy and if you happen to need a nice sale before the year is out let us know :p
Also, the highest personal tax rate will be higher than the corporate tax rate if the “Bush” tax cuts are not extended. Another question to ask while your accountant is on the clock. More incentive to incorporate too.