Legal Strategies to Minimize Taxes — Featuring Tax-Loss Harvesting & More

Selling investments can be a thrilling moment. Maybe you’ve just watched your portfolio grow over the years, or you’ve decided it’s time to cash in on a big winner. But here comes the twist—capital gains taxes. The IRS wants its share, and that can mean giving up a chunk of your profits. So how do smart investors legally minimize or even avoid paying capital gains taxes?
As a financial advisor with decades of experience guiding clients through complex financial landscapes, I, David Kassir of Manna Wealth Management, have helped many investors reduce their tax burdens legally and efficiently.
In this article, we’ll walk through everything you need to know about capital gains tax, how it works, and more importantly—proven strategies to help you legally avoid or minimize it.

🔍 What Is Capital Gains Tax?

Capital gains tax is the tax you pay on the profit (gain) when you sell an investment asset like stocks, bonds, mutual funds, or real estate.
There are two types:
• Short-term capital gains: Investments held for 1 year or less, taxed at your ordinary income tax rate.
• Long-term capital gains: Investments held for more than 1 year, taxed at 0%, 15%, or 20%, depending on your income.
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✅ 1. Hold Your Investments Longer (Prefer Long-Term Gains)

One of the easiest and most effective strategies is simply holding your investments for over a year. This qualifies your gains as long-term—subject to much lower tax rates.

💡 Example:
Imagine you bought $50,000 worth of tech stocks and sold them 6 months later for $70,000. That $20,000 profit would be taxed at your regular income tax rate—possibly as high as 37%.
Now, let’s say you held the same stock for over a year. That same $20,000 profit might be taxed at just 15% or even 0% depending on your income bracket.
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✅ 2. Use Tax-Loss Harvesting

This is a favorite among savvy investors.
Tax-loss harvesting involves selling losing investments to offset gains from winning ones. This can help reduce or eliminate your capital gains tax liability.

💡 Example:
You sold Stock A with a $10,000 gain, and Stock B has a $7,000 loss. Sell Stock B and now you only owe taxes on $3,000 of net gains.
Even better—you can deduct up to $3,000 of unused capital losses against your ordinary income each year, and carry forward any additional losses to future years!
At Manna Wealth Management, we often perform this kind of strategy for clients in tax-efficient portfolio rebalancing. It’s a game-changer in high-income years.
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✅ 3. Invest in Tax-Advantaged Accounts

Accounts like Roth IRAs, Traditional IRAs, and 401(k)s can help you defer or even completely avoid capital gains tax.
• Roth IRA: Investments grow tax-free, and withdrawals in retirement are also tax-free.
• Traditional IRA/401(k): Taxes are deferred until retirement. You don’t pay capital gains tax when you buy/sell inside the account.

💡 Example:
Let’s say you bought a mutual fund in a Roth IRA and it doubled in value. You can sell it without ever paying capital gains tax.
This is a powerful retirement planning tool and part of nearly every wealth-building strategy we implement at Manna Wealth Management.
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✅ 4. Offset Gains with the Capital Gains Exemption on Your Home

If you’re selling your primary residence, you may qualify for a $250,000 (single) or $500,000 (married filing jointly) capital gains exclusion.
Conditions:
• You must have owned and lived in the home for at least 2 of the last 5 years before the sale.

💡 Example:
You bought a home for $300,000 and sell it for $800,000. If you’re married, up to $500,000 of that $500,000 gain is tax-free.
This is one of the largest legal tax breaks available to U.S. taxpayers!
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✅ 5. Donate Appreciated Assets

Donating appreciated stocks or mutual funds to a qualified charity can help you avoid paying capital gains tax altogether—and still get a charitable deduction.

💡 Example:
You bought shares for $10,000 that are now worth $25,000. If you donate them, the charity gets the full value, and you get a $25,000 deduction while avoiding the capital gains tax on $15,000 of profit.
Philanthropy with tax advantages? That’s win-win.
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✅ 6. Gift Investments to Family Members in Lower Tax Brackets

Gifting appreciated assets to a child, grandchild, or other family member in a lower tax bracket can legally reduce or eliminate capital gains tax.

They sell the asset and pay less tax—or none at all if they fall into the 0% capital gains bracket.
⚠️ Be mindful of the “kiddie tax” rules that apply to children under 19 (or full-time students under 24). Also, remember the annual gift tax exclusion ($18,000 per person for 2024).
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✅ 7. Use a 1031 Exchange (Real Estate Investors Only)

If you’re selling real estate used for investment or business purposes, you can defer capital gains taxes by reinvesting the proceeds into a similar property using a 1031 Exchange.

This strategy allows you to grow your real estate portfolio tax-deferred—potentially for decades.
At Manna Wealth Management, our advisors work alongside real estate attorneys and CPAs to execute complex 1031 exchanges seamlessly for high-net-worth individuals.
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✅ 8. Consider Opportunity Zones

The 2017 Tax Cuts and Jobs Act introduced Opportunity Zones—economically distressed areas where investors can defer, reduce, or eliminate capital gains by reinvesting profits in Qualified Opportunity Funds (QOFs).

Benefits include:
• Deferral of original capital gains until 2026.
• Reduction in taxable gains if held for 5-7 years.
• No capital gains tax on new gains if investment is held for 10+ years.
It’s an advanced strategy, but one that could yield enormous tax savings with proper planning.
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💼 Final Thoughts from David Kassir

There’s no reason to pay more taxes than you legally owe.
With careful planning, the guidance of a knowledgeable advisor, and strategic timing, you can significantly reduce or even avoid capital gains taxes.

If you’re looking to implement any of the above strategies—whether it’s tax-loss harvesting, retirement account planning, or real estate tax strategies—don’t go it alone.