How High-Net-Worth Buyers Avoid Capital Gains Tax When Buying a Home

High-net-worth investors with large stock or crypto portfolios often face a dilemma when buying real estate: how do you purchase a luxury home without selling assets and incurring a huge capital gains tax bill? If you liquidate a sizable portfolio to pay cash for a primary or vacation home, you could lose 30% or more of your gains to taxes, especially in high-tax states like California or New Jersey. Fortunately, there’s a smarter strategy. By leveraging specialized “asset depletion” loans (and even crypto-backed mortgages), wealthy buyers can buy million-dollar properties while keeping their investments intact and deferring – or outright avoiding – capital gains taxes.

The Hidden Cost of Selling Investments to Buy a Home

Let’s say you’re an investor in California or New Jersey with a few million in a brokerage account. If you sell $1 million of stock to buy a house, you might owe over $300,000 in taxes when federal and state capital gains taxes are combined. That’s money straight to the IRS, and it doesn’t even count the future growth you forfeit by taking investments out of the market. High earners pay 20% federal capital gains tax (plus a 3.8% net investment surtax), and states like California tack on another 13.3%. In other words, more than a third of your hard-earned gains could vanish if you liquidate assets to purchase real estate.

This tax hit makes buying real estate with cash very inefficient for the wealthy. Unlike selling a primary home (which at least enjoys a $250K–$500K capital gains exclusion), selling stocks or crypto to raise cash offers no such break. Every dollar of appreciation is taxable upon sale. For investors in Illinois, Connecticut, or Colorado – or any state with income taxes – selling a chunk of your portfolio can feel like taking two steps back for every three steps forward. It’s a double loss: you shrink your investment portfolio and get slapped with a tax bill. No wonder savvy investors hunt for a better way to buy that new property.

Buy, Borrow, Don’t Sell: How the Ultra-Wealthy Avoid Taxes

Wealthy Americans didn’t become (or stay) wealthy by giving unnecessary money to the government. “Buy, Borrow, Die” has become a popular mantra among the ultra-rich. The idea is simple: Buy appreciating assets, Borrower (or leverage) against them to unlock spending money, and never Sell in your lifetime (the assets can later pass to heirs tax-free at a stepped-up value). This strategy allows billionaires to live a lavish lifestyle and pay minimal tax – legally. For example, rather than sell stock and realize gains, the superrich use their stock holdings as collateral for loans, which are not taxed as income. Oracle co-founder Larry Ellison, the 1st or 2nd richest man in the world depending on the day, reportedly pledged $30 billion of his Oracle stock to bankroll his $270M yacht, $300M Hawaiian island, and $80M mansion – all without triggering a taxable stock sale. If he had sold his Oracle stock he would have missed out on the massive price increase in 2025. Similarly, Elon Musk has pledged tens of billions in Tesla shares to serve as “an evergreen credit facility” for his needs.

These are extreme examples of how billionaires use leverage, but this borrow-against-assets tactic isn’t limited to billionaires. It’s common among mere millionaires too. Banks have eagerly facilitated this trend, as the volume of securities-backed loans has soared in recent years. The logic is simple: borrowing against assets lets you use your wealth without cashing out and paying taxes. For a high-net-worth homebuyer, the implication is clear: if you can borrow against your stocks or crypto to buy real estate, you can sidestep a huge capital gains hit.

Asset Depletion Mortgages: Turn Your Portfolio into Income

One of the most effective tools is an asset depletion mortgage (also called an asset dissipation loan). This type of loan lets you qualify for a home mortgage based on your liquid assets rather than your W-2 income. In essence, the lender converts your stocks, bonds, or cash reserves into a theoretical monthly income stream for underwriting purposes. For example, a common formula is to divide your total liquid assets by 360 (the number of months in a 30-year mortgage). If you have $3.6 million in investments, that would equate to $10,000 per month of qualifying income. With $5 million, it’s roughly $13,888 per month. This imputed income from your assets can then be used to qualify for a mortgage – even if you have little to no traditional job income.

Critically, you don’t actually have to liquidate those assets to qualify or to make your mortgage payments. The assets remain invested; the lender is just using them to gauge your ability to pay. It’s a win-win: you keep your portfolio intact and growing while securing the financing you need. Different lenders have different formulas and requirements – some might only count 70-80% of stock portfolio value to account for market volatility, and many discount retirement accounts unless you’re of retirement age. But a skilled jumbo loan specialist or mortgage broker can identify the most favorable programs. Certain niche lenders even use more aggressive calculations (for instance, dividing assets by 60 months instead of 360, effectively counting six times more income from the same asset pool). These flexible formulas can significantly boost your borrowing power.

Asset depletion loans are popular among high-net-worth buyers purchasing primary residences or second homes – and some programs even allow them for investment properties. Whether you’re buying a luxury home in California, a vacation condo in Colorado, or relocating to a high-cost market like Connecticut or Illinois, the asset depletion approach can work. The key requirement is that you have sufficient liquid assets (often at least a few hundred thousand dollars after down payment and closing costs, though for multimillion-dollar properties you’ll likely need a few million in assets). Lenders will also require that you set aside some of those assets as reserves and verify that the funds have been in your account for a few months. Essentially, they want to be sure your wealth is real, seasoned, and accessible. If it is, your stock portfolio can literally replace pay stubs and tax returns in the eyes of the underwriter.

Buying a Home Without the Tax Hit: Key Benefits for HNW Buyers

Using an asset-based mortgage strategy offers multiple advantages for wealthy buyers who are asset-rich but tax-averse.

No Capital Gains Tax Trigger

By not selling appreciated assets to fund your home purchase, you avoid the immediate capital gains tax event. Borrowed money isn’t taxed, so by financing the purchase with a loan, you skip the huge tax bill you’d face if you sold stocks or crypto to pay cash. Your investments can then be sold gradually on your own timetable (or not at all), rather than being forced into a large, taxable liquidation in one tax year.

Portfolio Stays Invested and Growing

Your money remains working for you. The stocks, bonds, or crypto you’ve accumulated can continue to appreciate while you enjoy your new property. Over the long run, the continued compound growth of your portfolio can help offset the cost of the mortgage interest.

Maintain Liquidity and Financial Flexibility

By leveraging an asset depletion loan, you preserve your liquidity. Rather than tying up millions of cash in a home purchase, you can finance it and keep the remaining capital accessible in your brokerage accounts. This provides a cushion for emergencies and the flexibility to pursue other investment opportunities.

Easier Qualification for Large Loans (Without High Income)

Asset-based mortgages are tailor-made for high-net-worth individuals who lack traditional income documentation. Whether you’re retired, semi-retired, or living off investment income, asset depletion programs turn your balance sheet strength into borrowing power. For example, a retiree with $5M in stocks and bonds but only $50K annual pension could still qualify for a multi-million-dollar mortgage by using her $5M portfolio as the income source.

Strategic Tax and Estate Planning

Using an asset-backed loan to buy property can dovetail with broader financial planning goals. You avoid a sudden income spike that could bump you into a higher tax bracket. If you’re in a state like California, Illinois, or New Jersey, not realizing gains now could save you tens of thousands in state taxes as well. Additionally, by not liquidating, you preserve the potential for a stepped-up basis. If the home is a long-term hold and your investments are eventually passed to heirs, you’ve maximized generational wealth transfer by never paying capital gains tax at all on those assets.

A Quick Case Study: Leverage in Action

Consider a hypothetical example: An entrepreneur in New Jersey has $4 million in a brokerage account and wants to purchase a $1.5 million shore house as a second home. If she liquidated $1.5M in stocks to buy it outright, she’d face roughly a $450,000 tax bill on her gains. Instead, she opts for an asset depletion mortgage. The lender counts her $4M portfolio as about $11,000 in monthly income for loan qualification. She secures a $1.2M mortgage and only puts $300k down. She keeps her investments intact, owes minimal taxes, and still gets her dream beach house.

Don’t Forget Crypto: Using Bitcoin or Ethereum Without Selling

Some wealthy buyers hold wealth in cryptocurrency rather than stocks. Similar strategies exist for crypto holders. Innovative lenders offer crypto-backed mortgage programs that let you qualify using your Bitcoin or Ethereum holdings—again, without selling your coins and triggering taxes. The concept is similar to asset depletion: the lender will treat your crypto as if it were a stock portfolio, often applying a discount to account for volatility. No crypto-to-cash conversion means no capital gains tax due—you keep your upside potential while buying real estate.

Practical Considerations and Next Steps

Before you rush off to buy a mansion in California or a ski chalet in Colorado with an asset depletion loan, keep a few points in mind:

You’ll Need a Solid Down Payment

Asset-based loans still require a down payment, often 20% or more for luxury properties. If you do sell some investments for this, plan carefully to minimize the tax hit. Lenders will subtract any funds you use for down payment and closing costs from your asset total before doing the income calculation.

Documentation and Asset Scrutiny

Be prepared to document your asset values thoroughly. Lenders will typically want at least 60 days of account statements and may require that funds be seasoned for a few months. They will also verify that assets are in your name or a revocable trust you control.

Slightly Higher Rates & Terms

Asset depletion mortgages are typically offered through non-QM channels, since they don’t fit standard Fannie Mae/Freddie Mac guidelines. That means the interest rates can be a bit higher, but for high-net-worth borrowers looking to optimize their tax structure,  a slightly higher rate is an acceptable price to pay to avoid triggering tax liability to pay for the house all cash.

Consult Your Tax and Financial Advisors

An asset-based loan should fit into your broader wealth management plan. Make sure your CPA or financial advisor is looped in so your mortgage aligns with your investment and tax strategy.

Exit Strategy

Consider your long-term plan for the home and the loan. Asset depletion loans can often be refinanced into standard loans down the line if your income situation changes. The beauty is, you stay in control of when to realize any gains.

Final Thoughts

For high-net-worth buyers, asset depletion mortgages and crypto asset loans represent a powerful, tax-smart way to purchase real estate. Instead of dumping stock and writing a giant check to Uncle Sam, you leverage your portfolio to qualify for the home you want. You get the house without triggering capital gains on your investments—preserving your wealth and its growth potential.

The mantra is clear: don’t sell what you can borrow against.

With the right broker and lender, you can keep your investments and buy your dream home—all while keeping the IRS at bay. Give us a call at 512.881.5099 or reach out to us here. We’d love to be your partner in the process.