Today, I’d like to explore strategies to avoid taxes on capital gains and dividends. Both of these investment returns come in two flavors. Short-term capital gains and ordinary non-qualified dividends are taxed like income.
Earn what you can while you’re accumulating wealth, & avoid turnover in your taxable account (buy & hold). The time to keep taxable income low is in retirement.
Tax gain harvesting is a strategy to utilize in early retirement. If you are in the fortunate position of having taxable income below the threshold above, take some capital gains to reset your cost basis & pay no tax.
It’s also true that giving, or joyful generosity, is a key contributor to our happiness. When you donate appreciated assets with long-term gains, capital gains taxes aren’t paid by the giver or receiver.
That’s right. Buy the farm. Kick the bucket. When assets in a taxable account are passed on to heirs in the next generation, the cost basis is reset to the current value. The assets can then be sold, tax free.