I have around $800k in the stock market concentrated in few tech stocks. My cost basis is around $300k. I am looking to sell and put it in an index fund where I can get some dividends along with growth. But that tax on $500k is stopping from making the move. Is there a way to defer taxes like a 1031 exchange for RE? Any other way to save on taxes? #personalfinance #investments
You could also generate dividends on your existing portfolio by selling calls
Interesting! Can you please explain more, I am new to this.
The term is “selling covered calls” if you want to look it up. I’m not too familiar with it, but there is a tradeoff : it means most of the time you get a consistent income stream, but in the off chance that the stock jumps a huge amount in a month, you won’t see the gains because the call holder will exercise it. It basically makes your income less volatile.
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(Might not apply to your situation, depending on your charitable giving goals) If you donate a portion to a donor-advised fund, you avoid any capital gains taxes on that and can deduct it as a donation (up to 30% of your AGI). It’s a double tax benefit, provided you want it to eventually go to charity. You can then invest it in index funds and spend the next 5+ years figuring out which charities to distribute the funds to. Always donate your most highly appreciated stocks, if you do give to charity.
Not looking to donate, we already donate 2% of our income :). But want to learn more. How can find more information on this?
Look up fidelitycharitable (dot org); I use them and their website explains the process and tax benefits quite well. FYI, many large charities can accept stock donations directly, so the main benefit of a donor advised fund is to bunch up tax deductions (and invest in the market tax free).