There are, actually, several ways to avoid paying capital gains taxes. It’s just that most of them are things people don’t want to do, like die, give away money, or have a relatively low income.
Not all hope is lost, though. Dr. Peter Kim gives us a couple of examples involving real estate that can help you defer capital gains taxes or avoid them completely, regardless of your income, charitable aspirations, or status as among the living!
Note that several proposals have been made to alter how capital gains taxes are collected. If gains push your income over $1 Million, you could soon pay ordinary income tax rates on those gains. There’s also been talk of eliminating the step-up in cost basis upon death, meaning that your heirs could face sizable tax bills upon receiving an inheritance. Time will tell if either of these proposals will become a reality.
This post was originally published on Passive Income MD.
[PoF: You can also avoid taxes on capital gains if your taxable income is on the low side (see table above), if you donate generously, or if you pass away and your heirs inherit your assets with a stepped-up cost basis. For more info on all of these, see the Top 5 Ways to Pay No Tax on Capital Gains & Dividends.]