To avoid or reduce capital gains tax (CGT), here are several effective strategies:

General Strategies to Avoid or Reduce Capital Gains Tax

• Hold assets for over one year : Holding taxable assets for more than a year qualifies you for the lower long-term capital gains tax rates, which reduces your tax liability

• Use your annual CGT allowance : Each year, you have a tax-free allowance for capital gains (e.g., £3,000 in the UK). Selling assets gradually over multiple tax years to stay within this allowance can minimize taxes

• Transfer assets to your spouse or civil partner : Transfers between spouses or civil partners are exempt from CGT. This allows you to use both partners’ allowances and potentially benefit from lower tax rates if one pays a lower rate

• Offset gains with losses : Realized losses on other investments can be used to offset gains, reducing the taxable amount. You can also carry forward unused losses to future years if reported properly

• Invest in tax-advantaged accounts : Using ISAs (Individual Savings Accounts) in the UK shelters investments from CGT. The "Bed and ISA" strategy involves selling shares outside an ISA and immediately repurchasing them inside an ISA to shelter future gains

• Donate assets to charity : Gifts of assets to registered charities are exempt from CGT, which can eliminate the tax on those gains

• Consider Enterprise Investment Schemes (EIS) : Investments in EIS-qualifying companies held for three or more years are exempt from CGT, and gains can sometimes be deferred by investing in EIS shares within certain timeframes

• Make pension contributions : Contributing to a pension can reduce your taxable income, potentially lowering your CGT rate by keeping you in a lower tax bracket

Specific Strategies for Property Sales

• Primary residence exclusion : If you have lived in your home for at least two of the last five years, you can exclude up to $250,000 (single) or $500,000 (married filing jointly) of capital gains from tax on the sale of your home

• 1031 Exchange (US) : Reinvesting proceeds from the sale of investment or business property into a similar property defers capital gains tax rather than eliminating it

• Joint ownership : Owning property jointly can help use multiple CGT allowances and reduce tax liability

• Invest in specified bonds (India) : Under Section 54EC, investing capital gains from property sales into government bonds within six months can exempt the gains from tax

• Reinvest in manufacturing companies (India) : Under Section 54GB, reinvesting gains from property sales into shares of eligible manufacturing companies can provide exemptions

• Capital Gain Account Scheme (India) : Depositing gains in this scheme can defer tax liability if the amount is used within three years

Summary

To avoid or reduce capital gains tax, consider holding assets longer, using annual exemptions, transferring assets to spouses, offsetting gains with losses, investing in tax-advantaged accounts, donating to charity, and using specific reinvestment schemes for property. Each country has specific rules and allowances, so tailoring strategies to your jurisdiction is important