How To Avoid Capital Gains Tax

Would you like to know how to avoid capital gains tax on your investment earnings, and how to do it legally? If yes, then this article is for you. Capital gains taxes are taxes levied on earnings from the purchase and sale of non-inventory assets. You cannot completely avoid capital gains taxes, but they can be reduced through the use of a few legal strategies.

1. Keep up with your capital losses. This is an easy and efficient way to to avoid significant losses due to capital gains tax. The first step to this strategy is to keep track of your capital losses when the market is slow. You then carry the losses over and subtract them from your gains when the market is performing well. Investors are allowed to carry a total of $3,000 over for exclusionary purposes; this amount is reduced by half to $1,500 when joint investors file separately.
2. Utilize gifting strategies. A popular strategy for investors in the stock market is to give gift stocks to family and friends in order to reduce net capital gains, and therefore the taxable amount. Gifters are limited in the maximum amount they can dispense as gifts without incurring the gift tax.
3. Consider the capital gains tax exclusions for personal residences. In real estate, investors are allowed to deduct large sums of money from capital gains if the property in question was their personal residence. Investors in this category often only pay capital gains taxes on earnings over $250 thousand; married couples who file separately may be able to exclude up to $500 thousand. In order to be eligible for these exclusions you must have lived in the residence for at least two years.