• Charitable donations can be a form of tax-free investing. Donating appreciated stocks via a few different vehicles can save on capital gains and, if you itemize, provide a deduction when itemizing your taxes. This break does come with conditions and restrictions.
• A 1031 exchange, which survived recent changes in tax laws, involves selling one investment (often real estate) and using the profit to buy a with a similar one, deferring capital gains. There are limitations on which investments can be exchanged and strict time limits for the replacement, among other conditions.
Stoner pointed out ways to generate income tax-free by using investments in rental real estate by “either owning property or being a partner in a real estate partnership that generates passive losses" that can be offset by other investments whose sole purpose is to generate passive income.
“Cash distributions from the net of the rental real estate can be offset by depreciation on the property, creating losses, which are offset by the passive income-generating partnerships,” Stoner said. “Cash flow from both investment types will be mostly, if not all, free of taxes.”
These tax-minded investing plans remain good for 2023, Primeau added, “assuming the global equity markets are still trading at or about current levels.”