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Can I avoid capital gains on the sale of my rental property?
Posted on 8/2/21 at 5:02 pm
Posted on 8/2/21 at 5:02 pm
I am selling a rental house. Ive owned it for about 10 years. I am going to have a gain on it. I want to use the money from that sale towards the purchase of a new primary residence. I am not ready to buy the new house yet, but plan on it within a year, perhaps two.
Is there any way to avoid or defer the gains tax, based on how I want to use the money?
I haven't lived in it within the past 5 years.
I want the money to be easily available to me when I go to purchase my next home so I am not sure that I want to 1031 into another investment property.
Is there any way to avoid or defer the gains tax, based on how I want to use the money?
I haven't lived in it within the past 5 years.
I want the money to be easily available to me when I go to purchase my next home so I am not sure that I want to 1031 into another investment property.
9
Posted on 8/2/21 at 6:14 pm to Seaux_cal_tiger
Hang onto it until you want to buy again. What kind of gains are you looking at?
Posted on 8/2/21 at 6:59 pm to Seaux_cal_tiger
You can do the sale of the property and purchase of the new primary concurrently, with closing funds of the new purchase contingent on the sale of the existing property closing. The sale will have to close a day or two before the new purchase closes, since one will be contingent on the other. Make sure the same title company (and Closing Agent for that matter) is doing both transactions if possible, so there's no need to worry about one title company transferring the funds to another between closings.
This post was edited on 8/2/21 at 7:01 pm
Posted on 8/2/21 at 7:13 pm to ColoradoAg03
Can’t avoid capital gains without a 1031. Also depreciation recapture
Posted on 8/2/21 at 7:22 pm to Seaux_cal_tiger
quote:
I haven't lived in it within the past 5 years.
I had the same question for this board but from research I believe I’m good. Piggybacking off OP if anyone knows any different and chimes in I’d appreciate the input.
I didn’t know about this rule and luckily think I just met these parameters because I closed on a property in Jan 2017 and moved in shortly after. I lived there until late 2018. We started collecting rent on the property Jan 1 2019. I sold the house in March 2021. So from the rule I read it said if you lived there for 2 of prior 5 years you wouldn’t pay capital gains. I mean by the skin of my teeth I think I can claim I was there for 24 months since I closed in Jan 2017 and didn’t start collecting rent until Jan 2019.
Am I good or is there a loophole I need to be aware of when filing my taxes to avoid capital gains tax from the sale this year?
Posted on 8/2/21 at 9:10 pm to Seaux_cal_tiger
Take the current capital gains rate while it’s still low
Posted on 8/2/21 at 11:18 pm to Seaux_cal_tiger
I am in process of this now. Sold a 9th ward duplex for a nice profit, put it in a 1031 intermediary, and my replacement property will be an investment in 200 acres of MS Timberland. I won't have issues if I hold it for investment, even if I hunt on it a little.
There are rules on personal use. If you do the 1031 exchange for a property that you rent for about a year, you could possibly move there afterwards. It gets tricky when you convert to personal use. If you pay the taxes, you could save the proceeds and buy a primary residence later.
There are rules on personal use. If you do the 1031 exchange for a property that you rent for about a year, you could possibly move there afterwards. It gets tricky when you convert to personal use. If you pay the taxes, you could save the proceeds and buy a primary residence later.
Posted on 8/2/21 at 11:39 pm to dat yat
You’re still on the hook for depreciation recapture correct?
Posted on 8/3/21 at 7:13 am to Seaux_cal_tiger
In addition to options listed, you could look into Opportunity Zone investment.
Posted on 8/3/21 at 7:19 am to Seaux_cal_tiger
Move into it for two years. You'll get to exclude up to $250K/$500K depending on marital status.
You'll still have ordinary income on the depreciation recapture. That pretty much stays with the property forever.
You'll still have ordinary income on the depreciation recapture. That pretty much stays with the property forever.
This post was edited on 8/3/21 at 7:31 am
Posted on 8/3/21 at 7:39 am to MMauler
quote:
Move into it for two years. You'll get to exclude up to $250K/$500K depending on marital status.
You'll still have ordinary income on the depreciation recapture. That pretty much stays with the property forever.
Strategically, this is the best call.
Posted on 8/3/21 at 7:54 am to Seaux_cal_tiger
If you’re going 1031 route, do it as soon as you can. Xiden isn’t a fan of personal investments in communities.
Posted on 8/3/21 at 8:34 am to jimbeam
quote:
Hang onto it until you want to buy again. What kind of gains are you looking at?
Bought it for 122k, selling it for 240.
I want to sell now bc I want to take advantage of the hot real estate market and the increase in value.
Posted on 8/3/21 at 8:43 am to Seaux_cal_tiger
quote:
Bought it for 122k, selling it for 240.
How much depreciation did you take (or was entitled to take)?
Posted on 8/3/21 at 10:08 am to Seaux_cal_tiger
I paid the tax on the depreciation recapture (ordinary income rates) and the capital gains tax on a small piece of real estate I sold this year. It was a small building we no longer used in the company.
My reasoning was two fold:
1) tax rates are not going to go down in the future so why defer the taxes
2) the real estate market is high and I saw no reason to do a 1031 and risk the market declining
My reasoning was two fold:
1) tax rates are not going to go down in the future so why defer the taxes
2) the real estate market is high and I saw no reason to do a 1031 and risk the market declining
Posted on 8/3/21 at 10:32 am to dat yat
Duplex to land? I thought there was some like kind rule
Posted on 8/3/21 at 10:53 am to Camp Randall
It can be done, as long as it’s an investment property. Though like I asked above, you still I think are on the hook for depreciation recapture since you can’t depreciate land
Posted on 8/3/21 at 4:31 pm to I B Freeman
Lol.
Tell that to real estate businessmen.
Oh don’t do 1031! Mess up your expansion deals now since taxes we assume to be raised later. Lol.
COULD BE very beneficial to defer now if you do Re as a business. WHIch we know you don’t do. You do Chinese trinkets.
Being you are not in the RE business and didn’t need the property it was in your best Interest to dump the crap now take profits and pay taxes and be done with it. I agree.
If and when your boy Biden raises taxes it still won’t stop my RE business.
Have a great day I B A CHINAMAN
Tell that to real estate businessmen.
Oh don’t do 1031! Mess up your expansion deals now since taxes we assume to be raised later. Lol.
COULD BE very beneficial to defer now if you do Re as a business. WHIch we know you don’t do. You do Chinese trinkets.
Being you are not in the RE business and didn’t need the property it was in your best Interest to dump the crap now take profits and pay taxes and be done with it. I agree.
If and when your boy Biden raises taxes it still won’t stop my RE business.
Have a great day I B A CHINAMAN
Posted on 8/3/21 at 4:43 pm to Dixie Normus
quote:
In addition to options listed, you could look into Opportunity Zone investment.
Been reading about this. Insane (in a good way).
This post was edited on 8/3/21 at 4:45 pm
Posted on 8/3/21 at 5:26 pm to I Love Bama
I’ve setup some. If you don’t need the cash, you can kill it on them. Anticipated changes to the code would likely add a lot of regulation to them so their status going forward is somewhat in limbo.
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