4 Capital Gains Tax Strategies Every Real Estate and Stock Owner Should Consider Before Selling

Executive Summary: Capital gains taxes can quietly erode the value of your real estate or stock portfolio. But with the right tools like charitable remainder trusts, real estate professional status, short-term rental structuring, and cost segregation, you can preserve wealth, protect income, and align your tax strategy with your family’s broader legacy goals. Strategic planning creates flexibility. Defined Outcome Investing turns it into purpose.

For high-net-worth families holding appreciated real estate or stocks, capital gains tax is one of the few remaining levers the IRS still pulls with force. If you sell, you pay potentially 15% to 37% of the gain when federal, Net Investment Income Tax, and California state taxes are combined. But there are smarter, values-aligned ways to handle a sale.

Whether you’re transitioning a property, trimming your portfolio, or passing assets to the next generation, your exit strategy matters. The goal isn’t just tax savings, it’s designing a better outcome for your family, your legacy, and your values.

Let’s walk through four targeted strategies that help you do just that.

1. Use a Charitable Remainder Trust to Redirect Income and Defer Taxes

A Charitable Remainder Trust (CRT) allows you to donate appreciated stock or real estate to a trust before the sale, avoiding capital gains tax on the transaction. You receive an income stream for life or a set number of years, then the remaining assets go to a qualified charity of your choice.

The benefits are threefold:

• No immediate capital gains tax at sale
• Current-year charitable deduction (subject to AGI limitations)
• Tax-efficient income during your retirement years

It’s one of the few ways to exit a highly appreciated asset while keeping more of the value working for your family and the causes you care about. For families with philanthropic intent and significant unrealized gains, this is a strategic long-term move.

2. Qualify as a Real Estate Professional to Unlock Deductibility

The IRS treats real estate losses as passive by default, meaning you can’t offset them against ordinary income. But under IRC §469(c)(7), real estate professionals can. The bar is high but not unreachable:

• You must materially participate in your real estate activities
• You must spend more than 750 hours per year on those activities
• Real estate must be your primary trade or business

Once you qualify, strategies like depreciation and cost segregation become far more powerful, allowing you to shelter current income and reduce taxable gains over time. And if only one spouse qualifies, joint filers can still benefit.

If real estate is a key component of your financial picture, this is one of the most valuable status changes you can pursue.

3. Take Advantage of the Short-Term Rental Loophole

Short-term rentals (STRs) offer another way to shift losses into deductible territory, even if you don’t qualify as a real estate professional. Under IRS Temp Regs §1.469-1T(e)(3), if:

• The average guest stay is seven days or fewer, and
• You materially participate in managing the rental

…then losses from that activity may be non-passive and deductible against ordinary income. For high earners, that opens the door to significant write-offs, especially when the property is purchased with cost segregation in mind.

Proper documentation is key: guest logs, management activity, and financial tracking must all be kept current to withstand IRS scrutiny.

4. Use Cost Segregation to Accelerate Depreciation

A cost segregation study breaks your property into its components (appliances, fixtures, landscaping, etc.) and applies shorter depreciation timelines (5, 7, or 15 years). The result: accelerated deductions that can significantly reduce current taxable income.

In many cases, this can create six-figure deductions in the first year. When paired with real estate professional status or the STR loophole, the deductions can be used to offset not just real estate gains, but W-2 income, business earnings, and more.

This is where Defined Outcome Investing can play a strategic role. Families who accelerate depreciation and reduce taxable income often reallocate those tax savings into structured equity strategies that offer:

• Capped growth
• Downside buffers
• Customizable income timelines

It’s a way to turn a tax savings event into a long-term, values-aligned investment plan.

Considering a sale this year? We helps high-net-worth families implement capital gains strategies that support generational wealth, charitable intent, and structured outcomes without leaving opportunity on the table. Contact Strategic Wealth Legal Advisors today to see how we can help you.