Are you thinking about selling your Fort Myers 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 Fort Myers house in our latest post!
Selling your house for a substantial profit might be exciting, but it’s essential to remember that Uncle Sam is entitled to his share! Capital Gains taxes are determined by the difference between what you initially paid for a property and the final selling price. It’s worth noting that Capital Gains taxes aren’t exclusive to real estate; they’re also applicable to assets like stocks, bonds, cars, and boats. However, in real estate transactions, there are several exclusions available that can help mitigate or eliminate the need to pay these taxes. Capital gains taxes typically come into play 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
Keeping track of all your home repair receipts is crucial. These receipts contribute to the overall cost basis of your property, which includes not just the purchase price but also any additional investments you’ve made into the property. When you eventually sell your home, this cost basis is subtracted from the sale price to determine the capital gain, which in turn affects the taxes you’ll owe on the sale. By keeping thorough records of your home repair expenses, you can ensure that you’re accurately calculating your cost basis and potentially minimizing your tax liability when it comes time to sell.
These numbers might seem unbelievable, but they reflect the reality of real estate appreciation. For instance, a home bought for $150,000 some years back, now selling for $550,000, fits this scenario. To manage the tax implications of such a sale, many turn to a “1031 exchange.” This allows you to defer capital gains taxes by reinvesting the proceeds from the sale into a similar property or properties of equal or greater value. By doing so, you can potentially defer paying taxes on the gains, enabling you to leverage your investment for further growth.
What Is It?
You might have heard of a 1031 exchange in the past, but do you know how it works?
A 1031 exchange takes place when you reinvest the proceeds from the sale of one property into another property, allowing you to defer the capital gains taxes owed. This process is commonly utilized by investors to defer property taxes. While there are specific qualifications that must be met, the procedure is generally straightforward and frequently employed to save substantial sums of money.
To Qualify
The qualifications for a 1031 exchange follow a standard set of criteria. To be eligible, you must have resided in the property for at least 2 of the past 5 years, and it must have been your primary residence. However, you cannot utilize this provision if you’ve claimed this exclusion on another property within the last 2 years or if you’ve acquired another property using a 1031 exchange within the past 5 years.
In addition, 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 Sell My House Now USA 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!