Earning income from investments comes with tax obligations, but strategic planning can help you minimize or delay those taxes, allowing you to retain more of your hard-earned money. Holding onto your investments is a simple yet effective way to defer capital gains taxes, as these are only due when you sell. Leveraging tax-advantaged accounts like IRAs and 401(k)s lets you invest pre-tax income and delay taxes until retirement. Similarly, 529 educational savings accounts grow tax-free if used for qualified education expenses.
Another strategy is tax-loss harvesting, where selling underperforming assets offsets gains and reduces taxable income. Philanthropy can also offer tax benefits; donating appreciated assets avoids capital gains and provides income tax deductions. Real estate investors can consider 1031 exchanges to defer capital gains by reinvesting profits in new investment properties.
For those with highly appreciated assets, a Deferred Sales Trust offers a way to defer taxes by exchanging the asset for a promissory note and letting the trust manage the sale. Irrevocable trusts like the DST Plus can further protect assets from estate taxes. Understanding and utilizing these tools can optimize your investments and reduce your tax liability.
source: https://capitalgainstaxsolutions.com/7-tax-strategies-to-keep-more-money-from-your-investments/
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