Are you thinking about selling your Rogers house? Depending on your property, capital gains taxes may become a factor. However, there is a way to defer your taxes! Learn how to avoid paying taxes when selling your Rogers house in our latest post!
You might be excited to sell your house for a big profit. However, Uncle Sam is always looking for his cut! Capital Gains taxes are assessed based on how much you paid for a property and what you actually end up selling it for. Capital Gains taxes aren’t just found in real estate. They are also assessed on things such as stocks, bonds, cars, and boats – or anything else you might sell at a profit. When it comes to real estate, there are many exclusions you may be able to take advantage of.. Capital gains taxes kick in when:
- You are single, and make more than 250k profit on the sale of a home
- You are married, and make more than 500k on the home
These limits apply to a home you have lived in. It is important to keep all of your home repair receipts as this is added to what you paid to determine the cost basis – or the actual amount of money you have put into the property before selling it.
These numbers might sound far-fetched, however, a home purchased years ago for $150,000, that sells for $550,000 today would easily fall into this category.
What about an investment property? Can I avoid paying capital gains taxes on the sale of an investment property?
In short, the answer is “yes.” In order to defer the amount of taxes you owe, you will want to do what they call a “1031 exchange.”
What Is It?
You might have heard of a 1031 exchange in the past, but do you know how it works?
With a 1031 exchange, you can reinvest the proceeds from the sale of one property into another property. In doing so, you will be able to defer the amount of capital gains taxes you owe. The process is fairly simple and used by investors all of the time in order to defer property taxes they owe. There are a few qualifications that must be met, but in doing so you may be able to save yourself thousands of dollars.
The qualifications of a 1031 exchange are pretty standard. The first thing you need to know is that you need to take action BEFORE you close on the sale of your property. You must use a Qualified Intermediary in the transaction in handle the funds of the sale of your existing property and purchase of your replacement property. If you don’t do this, you cannot complete the 1031 exchange.
The property you purchase must be of like kind. This is a pretty broad term. You can sell a piece of land and reinvest in a house. Or maybe you want to sell a duplex and buy land to develop. Any of these options will fly.
At Northwest Arkansas Home Buyer we work with 1031 exchange customers all the time! We are professional investors and property sellers who have a wide array of properties available at any given moment! Our inventory changes daily, with many types of properties to choose from. If you are looking to avoid paying taxes on a piece of property you wish to sell, we are here to help you with a solution! We will walk to through the entire process, saving you thousands of dollars along the way!
Are you ready to sell a Rogers house? We can help! Send us a message or give us a call today! (479) 802-0854
This article is not intended to serve as legal, tax, or other professional advise. Before making decisions about eliminating or deferring capital gains on the sale of a property, including through the use of a 1031 exchange, you should obtain your own legal, tax, or other professional advice.