Rendering to Caesar Is Optional

One day Jesus was teaching in the temple when a Pharisee—a religious leader and teacher—asked Jesus if it was lawful for Israelites to pay taxes. The Pharisee was aiming to put Jesus in a difficult spot. If Jesus said yes, the crowds surrounding Him would become angry because they felt Rome had no business running their lives and taxing them to enrich Caesar. On the other hand, if Jesus said no, the Roman soldiers would have cause to arrest Him and throw Him in jail.

In reply, Jesus held up a coin for them to see and asked the crowd, “Whose image and inscription is this?” The people knew all too well, because Caesar’s profile was embossed on every coin. “Caesar’s,” they answered. Then Jesus said, “Then pay to Caesar the things that are Caesar’s; and to God the things that are God’s” (Matthew 22:15–22, NASB).

Jesus’s answer went deeper than the Pharisee’s question, getting at the heart of the matter. Money owed to Caesar bore his image. Each one of us is created in God’s image, and so we are called to give our whole selves over to the Lord. Jesus’s response is about our hearts—while also acknowledging our responsibility to pay the government what we owe.

While we may dislike paying taxes just as much as the Israelite crowds who heard Jesus’s teaching, we take to heart Jesus’s directive to give what we owe to the government. However, did you know that in the United States, some taxes are actually optional? One example is capital gains tax.

Three ways to avoid capital gains tax.

The first way to opt out of capital gains tax is to give the appreciated property to heirs at your death. When the property owner dies, appreciated property receives a stepped-up basis to the value at the date of death.

The second is to give the property as an outright gift to charity. When the charity sells the property, it pays no tax on the sale.

The third way is through the use of a charitable trust. The appreciated asset is transferred to a trust with the agreement that the named charity will receive the principal at the termination of the trust (at death or at the end of a designated period of years). During the trust term, income is paid to the donor or other designated individuals. The asset donated to the trust can be sold by the trustee and the proceeds reinvested with no recognition of capital gains tax at the time of transfer or at the time of sale. The only time capital gains will ever be taxed is when they are distributed in the form of income, and that tax will be in lieu of ordinary income tax—usually at a lower rate.