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How to Minimize Taxes When Selling Income-Producing Real Estate

Posted by Chris Peterson | May 27, 2022 | 0 Comments

Are you a landlord who is looking to sell your rental property? If so, you need to be aware of the capital gains tax that you will owe on the sale. In this blog post, we will discuss how to minimize taxes when selling income-producing real estate. We will cover a variety of strategies that can help reduce your tax liability, including depreciation and 1031 exchanges. By following these tips, you can keep more of your hard-earned money in your pocket.

What Will I Owe?

Long-term capital gains tax rates are 0%, 15%, and 20%, depending on your income. These rates apply to properties held for more than a year. If you owned a property for less than a year, you would owe short-term capital gains taxes which are taxed as ordinary income in 2022.

Strategies to Minimize Taxes

There are a number of strategies that landlords can use to minimize the taxes they owe on the sale of a rental property. One strategy is to take advantage of depreciation. Depreciation is an annual tax deduction that allows you to recover the cost of your property over time.

Another strategy is to do a 1031 Exchange. This is a tax-deferred exchange in which you sell one investment property and use the proceeds to purchase another. This exchange can be used to defer capital gains taxes on the sale of your property when done according to IRS rules. 1031 Exchanges can be complex and should be done with the help of a Qualified Intermediary from the start of the process.

Getting Help

If you are thinking about selling a rental property but you are concerned about the amount of taxes that you may owe, please feel free to contact us at (888) 508-1901. We are here to guide you through your options, especially if you are considering purchasing another property in which you may wish to utilize a 1031 Exchange.

About the Author

Chris Peterson

Chris Peterson is the owner of Peterson Law Group. He practices primarily in the areas of wills, trusts and estate planning; probate and trust administration; elder law; and business law. Chris is also the owner of Brazos 1031 Exchange Company.


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