What you’d always hoped for has happened. Your stocks and real estate have grown in value. You can now cash them out and have the money that you need to live more comfortably. Except that there’s that pesky issue of taxes. You don’t want to have to pay exorbitant taxes on your stock earnings and real estate when you sell them so you’re looking for a way to avoid the capital gains tax. Is it possible to avoid capital gains tax in a legal way? You probably won’t be able to avoid paying taxes entirely (they’ve got to get their money somewhere, right?) but you can drastically reduce your capital gains tax if you play it smart.

One of the most common ways that people avoid the capital gains tax is by gifting stocks to their children. You are able to give a certain amount of your stocks to your child as a gift before a gift tax is imposed. At the time of this writing, that amount is $11,000 but you should double-check before gifting stocks to make sure that this remains accurate. If your spouse owns stocks as well, this amount may be doubled. You will then transfer the stocks to your child’s name before selling the stocks. The amount of capital gains tax is drastically avoided when this transaction occurs. You can learn more about the details of doing this from this MSNBC advice article on the issue.

But that just takes care of stocks, what about real estate. Rather than gifting, the most common means of avoiding capital gains on real estate is to assume real estate losses in the same year as the gain. In simpler terms, if you buy real estate in the same year that you sell real estate, the capital gains and losses will cancel each other out and you may be able to avoid taxes on the capital gains. If you are doing this, you should work with a professional experienced in tax law to make sure that you handle everything by the books. After all, you don’t want to make an investment to create capital losses if it’s going to backfire on you in the end.

Regarding real estate, you should also know that you reduce a portion of your capital gains if the real estate was used as your primary home and not as a rental property. So, let’s say that you’ve had a rental property for a number of years and it has gained in value. You want to sell it, but you want to avoid the capital gains tax. Would it be possible to move in to the residence for two years before making the sale? If so, you will qualify for exclusion of a large portion of the capital gains tax.

These are the most common methods of avoiding capital gains on stocks and real estate. You can also look into reducing or deferring capital gains through a number of other common methods. These methods include donations to charity, property exchanges, and installment sales. You can learn more from the Wikipedia article on the topic .