Give appreciated assets to family members or charity.
One option for reducing capital gains tax due on the sale of appreciated investments is to transfer the assets to your children. Once made, the gift is irrevocable. This can be done using the Uniform Transfer to Minors Act (UTMA) or Uniform Gift to Minors Act ~GMA). Under the tax law, the first $700 in investment earnings are tax free for children. For children under age 14, the next $700 in earnings are taxed at the child's rate and any earnings over $1,400 are taxed at your highest tax rate. For kids age 14 and over, the earnings in excess of $700 are taxed at the child's rate.

In the last scenario, children age 14 or older pay tax on the capital gain at their tax rate. If they're in the 15 percent bracket their tax on long4erm capital gains is 10 percent rather than the 20 percent rate that applies to tax payers in higher brackets. Keep in mind, however, when shifting assets that gift taxes may apply to transfers of more than $10,000 per person per year ($20,000 for joint gifts by spouses).

You also might consider gifting appreciated property held for more than one year to charities. This is a double win, as you not only avoid the capital gains tax, you also get a charitable deduction at the appreciated value. Something to be aware of is that not all appreciated property held more than one year receives this beneficial treatment. Appreciated tangible personal property (includes cars, jewelry, furniture, books, etc. not created by the donor) is divided into two categories:

• Donors who give property that will be used by the charity in a manner that is related to the charity's exempt purpose can deduct the fair market value of the property (whether appreciated or not)
• Donors who give property that will not be used by the charity in a manner that is related to the charity's exempt purpose can deduct the lesser of the fair market value of the property or the cost.

Offset capital gains with losses.
Recent market swings may have caused some of your investments to fare better than others. If so, it may make sense to offset gains from some holdings with losses from others. Capital losses are first used to offset capital gains. If your capital losses are larger than capital gains, you can deduct excess losses against ordinary income of up to $3,000 for that year. Any losses remaining after those deductions can be carried over and used in future years.

Postpone paying taxes until you retire.
Tax-deferral is a powerful tool for reaching your retirement goals - and saving taxes today. With tax-deferred investments any earnings can accumulate faster than on currently taxable investments due to compounding. Compounding is important because you earn money not only on your original investment, but also on accumulated gains that have not yet been taxed. In addition, when you withdraw your money in retirement, you may find that your tax rate is lower than it is today. There are several ways to defer taxes.        

• Contribute to an employer-sponsored retirement plan. Because contributions to 401(k), 403(b) and other tax-qualified retirement plans may be made with pre-tax dollars, you get the double benefit of reducing your current taxable income and deferring paying taxes until you withdraw the funds. Many employers also offer a matching feature on funds you contribute - giving you additional incentive to maximize your contributions. Withdrawals from tax-deferred accounts prior to age 59 V2 may be subject to a 10 percent IRS penalty.
• Contribute to an IRA. When money is invested in traditional IRAs, any earnings grow tax-deferred. If you qualify~ to invest in the new Roth IRA, it's even better yet. While your contributions are made with after-tax dollars, you pay no tax on distributions as long as the account has been held for at least five years and the distribution is due to: death, disability, to pay for qualified first-time homebuyer expenses or you are over 59 ½.
• Contribute to an annuity. Annuities offer another alternative for accumulating retirement savings. Although annuities are life insurance company products, they work quite differently than life insurance policies. Annuities offer a regular stream of retirement income with no limit on your investment amount. You can invest in a lump sum or at regular intervals, and any growth of the annuities is not taxed until distributed. (Corporations and other non-persons cannot get tax-deferral on annuities.)

Avoid taxes altogether.
Income earned on securities such as municipal bonds or municipal bond funds is exempt from federal income taxes. Investments in municipal securities from your state of residence may be state and local tax-exempt as well. When determining if tax-exempt securities are right for you, consult with a knowledgeable financial advisor who can help you compare the after-tax equivalent of these securities with other taxable investment alternatives.

Using these and other strategies can help you reduce your tax burden and improve your financial well-being. A tax professional can make sure you are taking advantage of all available deductions and a financial advisor can recommend a tax management strategy that helps ensure your assets are adequately allocated among currently taxable, tax-deferred and tax-exempt choices