They asked some good questions I couldn’t fully answer — even though I’m a “smart money person.”
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I Have $1 Million and Want It to Work for Me. How Do I Maximize Passive Income and Minimize Taxes?

I have a million dollars and I want to put it to work for me. Where can I put it to make the most amount of passive income from it? Also, how can I minimize taxes on that to be able to keep more of that money?
– Andrea
While today’s high-interest rate environment has been challenging in many respects, the silver lining is that investors seeking to earn passive income can do so more easily than they could at any point since the global financial crisis of 2007-2009.
Before laying out some options to capitalize on prevailing yields and considering the associated tax consequences, it’s helpful to evaluate your existing financial picture and ask yourself some important questions that will impact where you put the money. (A financial advisor can help you do both and this tool can help you match with one.)
Evaluate Your Financial Situation
Investing your $1 million dollars with an eye toward generating passive income may very well be the best option for this money. However, rather than viewing your decision in a vacuum, I would recommend looking at the money in the context of your broader financial situation and longer-term goals. In particular, it might be helpful to consider the following questions:
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Your total assets: Do you already have a portfolio of investments? Where are those assets located and what are their tax implications (e.g., IRA, Roth IRA, 401(k), brokerage account)?
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Your work status: How many more years will you have an income to add to your assets?
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Other income: Do you have any other sources of income (Social Security, pension, etc.)?
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Purpose for generating passive income: Are you retired and seeking to fund your ongoing expenses? Or is it to provide supplementary income while the rest of your portfolio continues to grow?
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Growth vs. income: Are you willing and/or able to sacrifice growth and preservation of purchasing power for the sake of income? If income is the only goal or need, then expectations for growth and your ability to maintain the purchasing power of the assets should remain low.
It is possible that after thinking through these questions you might pursue a different goal for the money. (And if you need more help assessing your financial situation, consider speaking with a financial advisor.)
Options for Generating Passive Income

Given the rise in interest rates since March 2022, income-oriented assets have become more attractive for those looking to earn a reasonable yield from their investments. Building a portfolio that includes a variety of assets capable of generating an aggregate yield is often a sound approach, as opposed to investing in a single product or security. While a financial advisor can help you build a robust portfolio, here are a few options to consider:
Money Market Funds
While generally considered an alternative to holding cash in a savings account, money market funds have become a popular topic among investors amid rate increases. Prior to the Federal Reserve’s recent series of rate hikes, money market yields were close to 0%, meaning you effectively earned no interest on your investment. Today, however, yields are closer to 5%, making this a much more compelling option for generating low-risk income.
Municipal Bonds
Municipal bonds are another solid option for income-focused investors. As with any investment, you’ll want to consider your goals before investing in municipal bonds since the risk profile and income potential will vary across securities. Evaluating credit ratings and maturities in relation to the yield you expect to earn in exchange for taking on credit and duration risk is a necessary step to take. Because they are typically not subject to federal taxes (or state taxes in the state where they are issued), municipal bonds tend to be a tax-efficient investment.
Certificates of Deposit
Like money market funds, certificates of deposit (CDs) have gained popularity as rates have increased. CDs can be particularly attractive if you do not need to liquidate the investment over its intended time horizon since you generally will pay a penalty for early withdrawals. It is therefore important to align a CD’s maturity date with the date at which you expect to need the money back.
Dividend Stocks
If you will need some growth to accompany the passive income your money generates, you may want to consider investing in dividend stocks. The S&P 500 High Dividend Index was paying a dividend yield in excess of 5% as of the end of September, making it competitive with other options listed. Unlike fixed-income products, dividend stocks will typically provide more opportunity for appreciation, which may help you maintain purchasing power over time if that’s a concern.
Other Options
Of course, there are additional options for generating passive income. These include Treasuries, high-yield bonds, master limited partnerships (MLPs), real estate investment trusts (REITs) and many others. Before committing to each, consider the level of risk you are able and willing to take, the amount of income you will need, and whether some element of growth is necessary. Also, evaluate the tax implications of the investments you choose. (And if you need more help evaluating and selecting investments, consider matching with a financial advisor.)
Mitigate the Impact of Taxes

Each of the options cited above is treated differently for tax purposes. The interest earned by fixed-income securities is taxed at ordinary income tax rates. Taxes on dividends from equity securities depend on how long you own the asset – qualified dividends are taxed at long-term capital gains rates while ordinary dividends are taxed at ordinary income rates. Appreciation from equity securities is taxed at capital gains rates.
It’s important to understand the tax treatment of individual assets since that will play a role in determining the type of account that holds these assets. Generally speaking, owning individual stocks and bonds, as well as their passively managed index alternatives, is more tax-efficient than actively managed mutual funds. Therefore, it’s typically advisable to own individual stocks, bonds and index funds in taxable brokerage accounts. Tax-advantaged accounts like IRAs and 401(k)s, and after-tax Roth IRAs, are generally more suitable for your actively managed funds and less tax-efficient securities like high-yield bonds.
Thinking holistically about the assets you own and where to allocate them will ultimately help you mitigate taxes. Of course, it can be helpful to speak with your tax advisor to better understand the impact on your individual situation, given your specific tax brackets. (Consider matching with a financial advisor with tax expertise.)
Bottom Line
Positioning your assets for passive income generation is a sound strategy, but only if it aligns with your long-term financial needs and goals. Before committing to this approach, critically assess your personal situation and the rationale behind seeking passive income. From there, you may consider various fixed-income products like bonds and CDs, as well as equity securities like dividend-paying stocks. Each option has its own tax consequences, and the type of account the securities are held in will also have an impact on taxes.
Tips for Generating Passive Income
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A CD ladder is one way to capitalize on today’s high-interest rate environment while also generating income. The strategy calls for opening multiple CD accounts, each with varying maturity dates. The idea is that you’ll always have a CD reaching its maturity date and paying out interest. Here’s a look at today’s CD rates.
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A financial advisor can help you decide which investments are most aligned with your financial goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Jeremy Suschak, CFP®, is a SmartAsset financial planning columnist who answers reader questions on personal finance topics. Got a question you’d like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.
Jeremy is a financial advisor and head of business development at DBR & CO. He has been compensated for this article. Additional resources from the author can be found at dbroot.com.
Please note that Jeremy is not a participant in the SmartAdvisor Match platform, and he has been compensated for this article. Some reader-submitted questions are edited for clarity or brevity.
Photo credit: ©iStock.com/Viorel Kurnosov, ©iStock.com/Sam Edwards
The post Ask an Advisor: I Have $1 Million and Want It to Work for Me. How Do I Maximize Passive Income and Minimize Taxes? appeared first on SmartReads by SmartAsset.
Alistair Berg | Digitalvision | Getty Images
A record 8.7% cost-of-living adjustment helped Social Security beneficiaries stave off the effects of inflation in 2023.
But as they file their federal returns this tax season, they may be surprised to find more of their benefit income has been taxed.
Capitol Hill lawmakers on both sides of the aisle have put forth proposals to eliminate those levies on benefit income altogether.
Rep. Angie Craig of Minnesota, who is championing a bill with fellow Democrats, calls the idea a “win-win.”
“It’s a tax cut for seniors and a way to ensure more Americans can depend on the Social Security benefits they’ve earned,” Craig said in a statement.
But experts say eliminating taxes on Social Security benefit income may be a tough ask as the program faces a funding shortfall.
COLAs go up, but tax thresholds stay the same
The 8.7% cost-of-living adjustment, or COLA, for 2023 — prompted by record high inflation — was the biggest annual increase in four decades. The Social Security Administration estimated it would put an extra $140 per month on average in beneficiaries’ monthly checks.
The year before — 2022 — the cost-of-living adjustment was 5.9%.
Both increases were substantially higher than the 2.6% average annual increase to benefits over the past 20 years due to record high increases in prices.
As inflation has started to subside, a 3.2% cost-of-living adjustment for 2024 has come closer to that average.
More from Smart Tax Planning:
Here’s a look at more tax-planning news.
But even as recent annual adjustments spiked, the thresholds at which Social Security benefits are taxed have stayed the same.
Up to 85% of Social Security benefit income may be taxed.
The levies are applied to combined income, or the sum of half your benefits and total adjusted gross income and nontaxable interest.
If your combined income as an individual tax filer is between $25,000 and $34,000 — or between $32,000 and $44,000 if married and filing jointly — you may pay taxes on up to 50% of your benefits.
If your combined income is more than $34,000 and you file individually — or if you’re married and file jointly and have more than $44,000 in combined income — up to 85% of your benefits may be taxed.
More may owe taxes on Social Security income
This year, some Social Security beneficiaries may see their benefits taxed for the first time, according to the Senior Citizens League. A 2023 survey from the nonpartisan senior group found 23% of respondents who had been receiving Social Security for three or more years paid taxes on their benefits for the first time that year.
That share may increase this tax season following the 8.7% cost-of-living increase in 2023, according to the group.
But just how much more beneficiaries will pay in taxes due to the “unusually large COLA” for 2023 depends on their personal circumstances, said Tim Steffen, a certified financial planner and the director of advanced planning at Baird.
“Whenever income is up, it’s reasonable to expect your tax liability to be as well, although that really depends on other income and deductions [you] might have between last year and this year, too,” Steffen said.
Over time, because Social Security’s combined income thresholds don’t change, more beneficiaries can expect to pay taxes on the money from their monthly checks.
“At a certain point in the future, essentially everyone will be paying taxes on their Social Security benefits,” said Emerson Sprick, associate director of economic policy at the Bipartisan Policy Center.
Proposals aim to eliminate ‘double tax’
Some lawmakers have decried a so-called “double tax” that those levies on benefits impose after beneficiaries paid into the system through payroll taxes.
“This is simply a way for Congress to obtain more revenue for the federal government at the expense of seniors who have already paid into Social Security,” Rep. Thomas Massie, R-Ky., who is sponsoring the Republican bill, said in a statement.
While both sides of the aisle have proposals to eliminate taxes on Social Security benefits, they differ on how to pay for it.
Craig’s proposal — called the You Earned It, You Keep It Act — would pay for the change with transfers from Treasury general funds and applying the Social Security payroll taxes to earnings over $250,000. Currently in 2024, the first $168,600 in employee wages is subject to the Social Security payroll tax.
The bill, which has seven Democratic co-sponsors, would help increase Social Security’s ability to make benefit payments on time and in full by 20 years, according to an analysis by the program’s chief actuary.
Massie’s proposal — called the Senior Citizens Tax Elimination Act — would pay for the cost of eliminating taxes on benefits through government fund transfers outside of the Social Security trust funds. The proposal, with 30 Republican co-sponsors, would not include any tax increases.
Not a ‘high probability of legislative success’
The idea of nixing taxes on Social Security benefits will likely be popular with the retirees who pay them. More than half of seniors — 58% — said the income thresholds for taxes on Social Security benefits should be updated to today’s dollars, according to a Senior Citizens League survey conducted last year.
But it may be tougher to get the change passed by lawmakers.
“They’re really popular messaging bills,” Sprick said. “But that doesn’t translate to a high probability of legislative success.”
Authorizing general fund transfers to shore up Social Security is “deeply unpopular” in Congress, Sprick said.
Social Security’s tax policies are already progressive, with just around 40% of beneficiaries owing levies on their benefit income, he noted.
Because of that, other changes to help the bottom 60% who do not owe taxes — such as providing higher income replacement for lower earners or a guaranteed level of minimum benefits — may better help those retirees, Sprick suggested.
We’re Selling Our House and Netting $550k to Downsize for Retirement. How Can We Avoid Capital Gains Taxes?

Selling your home to downsize can make your retirement more financially stable, but if you have a profit on the sale you might owe capital gains taxes. Fortunately, in many cases those selling their primary residence who are single can exclude $250,000 from capital gains taxes, while married couples filing jointly can exclude $500,000. Employing this exclusion can reduce or eliminate capital gains taxes since earnings are unlikely to go beyond those figures, if at all. Some restrictions do apply, however, so it’s best not to assume your gain will be excluded. There are other strategies that you might be able to use, but these may have significant limitations, uncertainties and risks.
Do you have questions about retirement planning? Speak with a financial advisor today.
Is the Gain on Your Home Sale Taxable?
Selling your primary residence may result in capital gains taxes, but for many people it doesn’t. To determine whether your gain will get taxed, you must first figure out how much gain qualifies to be excluded. The amount of the gain that can be shielded from taxes depends on the filing status you choose when you submit your income tax return.
Single filers can exclude $250,000 and married couples filing jointly can exclude $500,000 of profits on the sale of a primary home. However, to qualify for these exclusions, the sellers must have owned and lived in the home at least two of the five years prior to selling. Also, you can’t have used the exclusion in the previous two years.
If your gain exceeds the exclusion, the amount of the overage will be taxed as capital gains. The amount of tax depends on how long you have owned the home. If you have owned it for more than a year, you’ll likely qualify for long-term capital gains tax rates of 0%, 15% or 20%. The exact rate depends on your income and other capital gains for the year, and the gain on your home sale gets included when figuring that. In this case, a married couple who makes $550,000 in gains on their home sale would likely be subject to the 15% long-term tax bracket, which starts at $47,025 in 2024.
Downsizing in Action
Here’s how this all could play out, looking at three possible scenarios:
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A married couple filing jointly can exclude $500,000 in gains from taxation after the sale. This would leave only $50,000 to be taxed. Because the couple has owned and lived in the home for at least two out of the last five years, long-term capital gains tax rates will apply. The tax bill for the sale alone would be $50,000 at 15%, or $7,500.
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If you aren’t eligible for any exclusion, due to not living in the home two of the previous five years or using the exclusion more recently than two years, then the entire $550,000 will be taxed. If the whole gain of $550,000 is taxed at 15%, the bill would be $82,500.
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For the sake of an example, let’s assume you were single and meet the criteria for the exclusion. In this scenario, you can exclude $250,000 of the $550,000 gain, which leaves $300,000 taxable. The rate will likely be 15%, as the 20% long-term tax bracket starts at $518,900 for 2024. This will result in 15% taxes owed on the $300,000, or $45,000.
While these guidelines apply to federal capital gains taxes, some states also levy capital gains taxes. States tax capital gains in a variety of ways, so you need to check local laws to get an accurate idea of your tax bill.
Other Approaches

You may be able to reduce your taxes, even if none or only part of the gain qualifies for an exclusion. This can be done by making sure you accurately figure your cost basis of the house. To do this, add up all the improvements you made to the property. Now add this figure to the property’s original cost and subtract it from the sale price.
If you have previously not fully accounted for your cost basis, this can reduce the amount of the gain and the subsequent taxes you’ll owe. For instance, if you spent $50,000 on a kitchen renovation and hadn’t included that in your cost basis, accounting for it correctly could reduce your $550,000 gain to $500,000.
Another way to potentially defer taxes is by using the gain to acquire a new residence through a like-kind exchange. This delays tax liability until you sell the replacement home. Many limitations and risks accompany these types of deals, however. For example, if you downsize to a less expensive home, the difference in the sale price of your former residence and the price of the new property could be taxable, among other complications.
Bottom Line
A home seller pocketing $550,000 can legally avoid some capital gains taxes through an exemption and other legitimate tax minimization strategies. However, limitations are abound, so consult a financial advisor to understand how these situations work and how to plan for them.
Retirement Tax Tips
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A financial advisor can help you plan for taxes and retirement. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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SmartAsset’s income tax calculator can shine a revealing light on how much you’ll owe or receive as a refund next time you file taxes.
Photo credit: ©iStock.com/svetikd, ©iStock.com/pcess609
The post We’re Selling Our House and Netting $550k to Downsize for Retirement. How Can We Avoid Capital Gains Taxes? appeared first on SmartReads by SmartAsset.
I’m going to end up paying taxes on 85% of my Social Security benefits in retirement. What will my final check look like?

Dear MarketWatch,
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I have been taking a look at my Social Security statements. If I wait to collect until age 67 (I’m currently 52), in theory I would be eligible to receive $3,000 per month. These calculations are based on my current situation, not factoring the deficit anticipated after 2034 when Social Security runs out of excess funds and can only pay about 80%.
I hope to be able to collect an annual income of around $75,000 per year from my 401(k), plus the $36,000 per year in Social Security. That puts me well above the tax-free zone and I expect to get to pay federal taxes on 85% of my Social Security. As a single-filer in Virginia, what can I expect my $3,000 per month Social Security income to look like ?
If you’re turning 65 this year and want to share your story, contact us at HelpMeRetire@marketwatch.com .
Dear Reader,
To answer your question involves a lot of variables, many of which are not yet known. You’re right that the $3,000 is based on your current situation, but that also means it’s dependent on nothing in your life changing, including your job or your income.
For those unaware, Social Security income can be taxed. If you’re filing as an individual, and your “combined income” (that’s your adjusted gross income, plus nontaxable interest and one-half of your Social Security benefits) is between $25,000 and $34,000, 50% of your benefit may be taxed. Anything above $34,000, and the taxable portion rises to 85%. For people who file a joint return, the range for the combined income (including your spouse’s) is $32,000 to $44,000. Anything above that, and 85% of benefits could be taxed. About four in 10 people who receive Social Security benefits pay federal income taxes, the Social Security Administration said on its website .
You are allowed to have federal taxes withheld from your benefits if you want to see less of a tax liability come tax season. That would also affect what you see in your Social Security check every month.
And keep in mind, this is separate from state taxes. Many states do not tax Social Security, but a handful do. In 2024, that list includes Colorado, Connecticut, Kansas, Minnesota, Montana, New Mexico, Rhode Island, Utah and Vermont, according to Nerdwallet .
Back to your question. It is very hard to know for sure what your Social Security benefit will look like, since you are 15 years out from when you plan to claim benefits. So much can change in that time, including tax brackets and the ranges for Social Security taxation, policy for the program and your own personal circumstances. Also, while the program is currently on track to run into financial issues by 2034, Congress has never let Social Security falter before, and there’s still time for it to be fixed.
Focus on your current saving s plan
While you’re waiting for more clarity regarding your Social Security income, you can focus on what you are already saving for the future, and how to be as tax-efficient as possible when you get to retirement. If you have most of your money in pre-tax accounts, like a traditional 401(k) plan or an IRA, you might want to take advantage of Roth accounts, said Marguerita Cheng, a certified financial planner and chief executive officer of Blue Ocean Global Wealth. This could be in the form of a Roth 401(k), if your company allows it (or a split between a traditional and Roth 401(k), if that’s an option). It could also be a Roth IRA. You can contribute directly to a Roth IRA, or convert some of your pre-existing funds into one.
You don’t have to jump on a Roth conversion now if you’re in a high tax bracket, or a tax bracket you expect is higher than it will be later on.
“This could be after retirement, but before beginning Social Security benefits,” said Seth Mullikin, a certified financial planner and founder of Lattice Financial. “It will also help reduce their RMDs as the Roth IRA is not subject to RMD rules.”
HSA accounts and delaying Social Security
Funding a Health Savings Account is another tax-advantageous strategy. “HSAs can reduce taxable income in retirement, which can affect Medicare premiums and the amount of Social Security benefits subject to federal income tax,” Cheng said. “In retirement, using the HSA (instead of your IRA) for medical is preferable because not only are HSAs funds not taxable, they don’t affect your provisional income. Provisional income is what determines how much of your Social Security is included in your taxable income.”
You may also decide you can delay your Social Security benefits until age 70, or closer to age 70 at least. The longer you delay your benefits up until that point, the more money you’d get in Social Security benefits. You’d also have less time potentially subject to taxation. Pushing back claiming could also reduce the amount of money subject to taxation, said Ashton Lawrence, a certified financial planner and director at Mariner Wealth Advisors. “By delaying benefits, pre-retirees can maximize their Social Security income while minimizing tax liabilities,” he said.
It’s great that you’re trying to be as specific as possible in your benefits, but know that you do have time — and that time can make all sorts of changes. Instead of trying to drill in on one specific number right now, keep an eye on how your personal circumstances (and the political ones around us) affect your Social Security, and prepare as best as you can for what you do have control over.
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‘I Love Miami’ – Jeff Bezos Plans To Unload A Massive Amount Of Amazon Shares, But Moving To Florida Will Save Him $600 Million In Taxes
Jeff Bezos, the founder of Amazon.com Inc., has made the strategic decision to sell up to 50 million shares of Amazon stock, a move that comes amid his transition from Seattle to Miami. The decision, detailed in a regulatory filing, outlines a trading plan set to conclude by Jan. 31, 2025. Bezos’s relocation is not only a financial maneuver but also a personal decision, influenced by family ties and business operations.
In an Instagram post, Bezos shared the emotional weight behind his move, emphasizing the significance of family and professional considerations.
“My parents have always been my biggest supporters. They recently moved back to Miami, the place we lived when I was younger (Miami Palmetto High Class of ’82 — GO Panthers!),” Bezos said. “I want to be close to my parents, and Lauren [Sanchez] and I love Miami.”
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The relocation comes after his engagement to Sanchez last year, following his divorce from MacKenzie Scott in 2019.
Bezos also highlighted the strategic importance of Florida for his aerospace venture, Blue Origin.
“Also, Blue Origin’s operations are increasingly shifting to Cape Canaveral,” he said. “For all that, I’m planning to return to Miami, leaving the Pacific Northwest.”
Blue Origin has been expanding its footprint in Cape Canaveral since 2015, marking a significant pivot in its operations toward the Atlantic coast.
Reflecting on his time in Seattle, Bezos expressed a sentimental attachment to the city where Amazon was born.
“I’ve lived in Seattle longer than I’ve lived anywhere else and have so many amazing memories here,” he said. Despite the excitement of a new chapter in Miami, he acknowledged the emotional complexity of the move, saying, “As exciting as the move is, it’s an emotional decision for me. Seattle, you will always have a piece of my heart.”
The financial implications of Bezos’s relocation are profound, given Washington’s recent implementation of a 7% capital gains tax, from which Bezos will now be exempt in Florida. Amazon’s stock, valued at approximately $169 per share, means Bezos’s holdings could be worth around $8.5 billion. This move could result in a significant loss of potential capital gains tax revenue for Washington, estimated at approximately $595 million from Bezos alone.
The revenue from Washington’s capital gains tax is intended to support educational programs, highlighting the interconnectedness of individual financial decisions, state policies and public services.
While Bezos has invested $147 million in Florida real estate over the last year, this move will enable him to save over half a billion dollars in taxes. Regardless of whether his decision is driven by a fondness for Florida, a wish to be closer to his parents or strategic business considerations, the financial benefit of the tax savings is significant.
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In a move that could have ripple effects across Europe, Spain is tightening its grip on crypto monitoring and seizing digital assets for tax debts. The Ministry of Finance, led by María Jesús Montero, is spearheading legislative reforms to grant the Spanish Tax Agency enhanced powers to identify and seize crypto holdings from taxpayers with outstanding debts.
This follows a February 1st decree expanding the entities obligated to report tax information to the Treasury, encompassing banks, savings banks, and even electronic money institutions.
The measures come amidst Spain’s proactive approach to regulating the digital asset landscape ahead of the European Union’s Markets in Crypto-Assets Regulation (MiCA) framework, set for full implementation in December 2025.
Key Provisions Of The Crackdown
The proposed crackdown on cryptocurrency in Spain includes several key provisions aimed at strengthening the government’s ability to regulate and collect taxes in the digital asset space.
One major aspect of the legislative changes is the expansion of the Tax Agency’s authority, granting it the power to directly identify and seize assets associated with taxpayers having overdue debts.
Additionally, the February 1st decree widens the scope of entities obligated to report tax-related data to the Treasury. This now includes not only banks, savings banks, and credit cooperatives but also electronic money institutions. This expanded list potentially provides a broader framework for tracking digital currency transactions.
Spanish residents holding crypto assets on foreign platforms are subject to a mandatory declaration to the tax authorities by the end of March 2024. Initiated on January 1st, 2024, this declaration period requires individuals and corporations to disclose the value of their crypto holdings abroad as of December 31st, 2023.
Total crypto market cap at $1.61 trillion on the daily chart: TradingView.com
While all Spanish residents with foreign crypto holdings are required to make a declaration, only those exceeding €50,000 (approximately $54,000) are obliged to declare them for wealth tax purposes.
Individuals holding their crypto in self-custodied wallets, outside of exchange platforms, must report them through the standard wealth tax form. These measures collectively aim to establish a more robust regulatory framework for cryptocurrency transactions and holdings in Spain.
Spain At The Forefront Of Crypto Regulation
Spain’s proactive stance on crypto regulation positions the country as a frontrunner within the European Union. Notably, the country is implementing its own crypto regulatory framework ahead of the EU-wide MiCA framework coming into effect in late 2025. This preemptive approach underscores Spain’s commitment to establishing clear regulations within the crypto space.
Furthermore, Spanish tax authorities issued over 325,000 warnings in 2023 to residents who failed to declare their crypto holdings, marking a significant increase from the 150,000 warnings issued in 2022. This highlights the government’s growing focus on ensuring compliance within the crypto tax landscape.
Challenges And Considerations
While Spain’s efforts to regulate and tax cryptocurrencies are notable, some potential challenges remain. The rapid implementation of these changes might pose regulatory hurdles, requiring careful calibration to ensure effectiveness and minimize unintended consequences.
Additionally, accurately tracking and seizing self-custodied crypto assets, held outside of exchange platforms, could prove difficult due to the inherent anonymity associated with such wallets.
Global Implications
Spain’s move could serve as a precedent for other countries seeking to establish frameworks for monitoring and taxing cryptocurrencies. As the global crypto market continues to evolve, Spain’s proactive approach offers valuable insights for policymakers worldwide navigating the complexities of regulating this dynamic asset class.
Featured image from Pixabay, chart from TradingView
Disclaimer: The article is provided for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.
I’m Selling My House and Netting $640k to Downsize for Retirement. How Can I Avoid Capital Gains Taxes?

Selling your longtime home and downsizing in retirement is a common practice for people entering their golden years. While profits from a home sale are considered capital gains, the IRS typically allows you to exclude part of the profit – if not all of it – from your taxes.
But what if you sold your home and pocketed as much as $640,000? You could still end up owing a hefty capital gains tax bill on the sale depending on if you’re married or not. Then again, you still may be able to avoid taxation by using other investment losses to offset your gain or delay taxes with a like-kind exchange. But if you need additional help managing your capital gains tax bill, consider speaking with a financial advisor.
About Capital Gains Taxes
When an investment appreciates and sells for more than its original purchase price, the profit gets taxed. This applies to assets like stocks, bonds, collectibles and real estate, including your personal residence.
For assets that are owned for more than a year, the IRS applies long-term capital gains rates of 0%, 15% or 20%. The precise capital gains tax that will be applied depends on the taxpayer’s income, but capital gains taxes are generally lower than the ordinary income tax rates. Many U.S. states also tax capital gains, levying rates they use for ordinary income.
Gains on personal home sales are treated differently, however. You can exclude some or all of the gain from taxation if you lived in the home for at least two of the last five years (cumulatively). And when you’re getting ready to make a large financial decision, like selling your home to downsize, talk it over with a financial advisor who can help you understand how the move will impact your larger financial plan.
Capital Gains Tax Impact

If you net $640,000 from the sale of your longtime home, your capital gains tax bill will depend on a couple of factors:
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Filing status. This affects how much of the gain you can exclude. If you’re married and filing jointly, you can exclude up to $500,000 in home sale profits. This would leave $140,000 of the $640,000 subject to taxes. If you’re filing as an individual, you can exclude up to $250,000. In this case, $390,000 would be subject to taxes.
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Income. Capital gains tax rates for most people are 0%, 15% and 20% based on their income.
Assuming you pay 15% on capital gains, you’ll owe $21,000 ($140,000*0.15) in federal taxes after applying the exclusion if you’re married and filing jointly. If your filing status is single, you’ll owe $58,500 in capital gains tax ($390,000*0.15). But remember, a financial advisor can help you plan for capital gains taxes and find ways to potentially mitigate them.
Avoiding Capital Gains Tax
You have limited options for avoiding capital gains tax after applying the principal residence exclusion. However, there are some available techniques, including:
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Accurately calculating your cost basis. The cost basis is the purchase price of your home plus eligible improvements. You subtract the cost basis from the amount you sell the home to get the taxable gain. Including the expense of adding on a room or other improvement in your cost basis could significantly reduce your taxable gain.
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Offsetting investment gains with losses. You can reduce taxable capital gains by harvesting investment losses. For instance, if you sold a stock for $40,000 less than you paid for it, the loss would offset $40,000 of your home sale profit. In that case, you would reduce the taxable gain on your home sale from $21,000 to $15,000 (assuming you’re married and file jointly).
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Using a like-kind exchange. Using a technique called a 1031 exchange, you may be able to use the entire proceeds from your home sale to purchase another residence without having to immediately pay taxes on the gain. While tax rules limit 1031 exchanges to investment properties, you may be able to do an exchange on your home if you move out and rent it to someone else for at least two years. This converts it into an investment property in the eyes of the IRS. At that point, you can do a like-kind exchange for another property. After renting this new property out for a year or so, you may then be able to move into it and use it as your personal residence.
And if you need advice regarding a 1031 exchange or the other strategies listed here, consider speaking with a financial advisor.
Capital Gains Tax Avoidance Limitations

These techniques can only be used in certain situations. For instance, special rules may apply if you inherited the home. Other limitations could also apply, including:
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You may only be able to avoid taxes on a portion of your gains. Unless your gain is less than the allowable exclusion or you have sufficient offsetting losses, part of your gain may still be taxed.
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A like-kind exchange only delays taxes. When you eventually sell the property you exchanged for, that sale will trigger taxes.
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Not all properties qualify for exclusion. The capital gains exclusion for primary residences doesn’t apply to vacation homes or investment properties.
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There are residency period conditions. Living in the home for less than two of the previous five years means you can’t use the exclusion. You may have to provide tax returns, utility bills and other documentation to show you lived there for the required time.
Bottom Line
Homeowner who meets IRS conditions can exclude up to $500,000 in profits from the sale of their primary home from taxes ($250,000 if they’re single). However, a gain that exceeds the IRS exclusion limits will be subject to long-term capital gains taxes if the home was owned for more than a year. In that scenario, you could use tax-loss harvesting to offset part of the gain and lower your tax bill or a like-kind exchange to defer the taxes until a later date.
Tips for Managing Capital Gains
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Develop a strategy for protecting gains realized on your home sale from taxes by consulting a financial planner. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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Use SmartAsset’s Capital Gains Tax Calculator to estimate how much you could owe in tax on the sale of assets like stocks and real estate.
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The post I’m Selling My House and Netting $640k to Downsize for Retirement. How Can I Avoid Capital Gains Taxes? appeared first on SmartReads by SmartAsset.