Here\u2019s how it works:<\/p>\n\n\n\n

\n
1. Sell the property<\/strong>: You sell your investment property.<\/li>\n\n\n\n
2. Find a new property<\/strong>: You have 45 days to identify a similar property to buy.<\/li>\n\n\n\n
3. Use a Qualified Intermediary<\/strong>: You\u2019ll need someone to hold the funds from the sale until you buy the new property.<\/li>\n\n\n\n
4. Buy the new property<\/strong>: You have 180 days to complete the purchase.<\/li>\n<\/ol>\n\n\n\n

   This way, you delay paying taxes on the profit from the sale until you sell the next property.<\/p>\n\n\n\n

   Example of a 1031 Exchange<\/strong><\/h3>\n\n\n\n

   Imagine you bought a building for $500,000, and now it’s worth $1.3 million. If you sell it, you would normally have to pay taxes on the $600,000 profit. But with a 1031 exchange, you can reinvest that $600,000 into another property without paying taxes immediately.<\/p>\n\n\n\n

   When Does a 1031 Exchange Not Apply?<\/strong><\/h2>\n\n\n\n

   A 1031 exchange only works for investment properties. You can\u2019t use it for your primary home. Also, if you don\u2019t follow the rules closely or miss the deadlines, you could lose the tax benefit.<\/p>\n\n\n\n

   Factors That Affect Capital Gains Tax<\/strong><\/h2>\n\n\n\n

   Several things can affect how much tax you\u2019ll have to pay:<\/p>\n\n\n\n

   Income Level and Filing Status<\/strong><\/h3>\n\n\n\n

   Your income level and how you file your taxes (single, married, etc.) play a big role. For example, if you\u2019re single and earn between $47,026 and $518,900 in 2024, you\u2019ll pay 15% in capital gains tax.<\/p>\n\n\n\n

   Type of Property<\/strong><\/h3>\n\n\n\n

   If you sell your main home, you can get tax breaks like the 121 Exclusion. But if you sell a vacation home or rental property, you won\u2019t get the same benefits.<\/p>\n\n\n\n

   How Long You Owned the Property<\/strong><\/h3>\n\n\n\n

   The longer you own a property, the lower your tax rate will be. If you sell a property after owning it for less than a year, you\u2019ll pay short-term capital gains tax<\/strong>, which is usually higher. If you own the property for more than a year, you\u2019ll pay long-term capital gains tax<\/strong>, which is lower.<\/p>\n\n\n\n

   FAQs About Avoiding Capital Gains Tax on Real Estate<\/strong><\/h2>\n\n\n\n

   How much is capital gains tax on real estate?<\/strong><\/h3>\n\n\n\n

   Capital gains tax can be as low as 0% or as high as 20%, depending on your income and the type of property you sell.<\/p>\n\n\n\n

   Can I avoid capital gains tax by reinvesting in another property?<\/strong><\/h3>\n\n\n\n

   Yes! You can defer capital gains taxes by using a 1031 Like-Kind Exchange when you sell one investment property and buy another.<\/p>\n\n\n\n

   How often can I use the 121 Exclusion?<\/strong><\/h3>\n\n\n\n

   You can use the 121 Home Sale Exclusion once every two years.<\/p>\n\n\n\n

   Do capital gains taxes apply to inherited properties?<\/strong><\/h3>\n\n\n\n

   Yes, but you may benefit from a step-up in basis<\/strong>, which adjusts the property\u2019s value at the time you inherit it, potentially reducing the taxes you owe.<\/p>\n\n\n\n

   Conclusion: Make Smart Moves to Avoid Capital Gains Tax<\/strong><\/h2>\n\n\n\n

   Capital gains taxes can take a big bite out of your profit when you sell a home or investment property. But by using the 121 Home Sale Exclusion<\/strong> or the 1031 Like-Kind Exchange<\/strong>, you can keep more of your money. Whether you\u2019re selling your main home or an investment property, these tax strategies can help you build wealth and save for the future.<\/p>\n\n\n\n

   So, the next time you’re thinking about selling your property\u2014whether it\u2019s a lovely home like Brigade Citrine<\/strong> or an investment building\u2014be sure to use these tips to avoid or delay capital gains taxes. You\u2019ll thank yourself later!<\/p>\n","protected":false},"excerpt":{"rendered":"

   Selling your home or property should feel exciting, not stressful because of taxes. After all, selling real estate often brings<\/p>\n","protected":false},"author":4972,"featured_media":194119,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[18],"tags":[9900,1993],"class_list":["post-194118","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate","tag-property","tag-real-estate"],"yoast_head":"\n