.png)
Are you a property owner selling an investment or commercial property? If so, capital gains taxes could be a significant concern. Fortunately, the U.S. tax code provides several strategies to reduce or defer your tax liability. These options allow you to reinvest your gains into real estate, offering flexibility in managing your investments—whether actively or passively—and diversifying across geographic locations and asset types.
Read the full article in the New York Real Estate Journal for a deeper dive into these strategies.
Here are three common strategies to explore:
1. 1031 Exchanges: Defer Taxes with Like-Kind Properties
For those seeking active property management, a 1031 exchange offers the opportunity to defer capital gains taxes. You can defer taxes indefinitely by reinvesting proceeds from your property sale into a like-kind property within specific timeframes. This strategy allows you to capitalize on shifts in real estate trends—whether you're exchanging an office building for multifamily units, industrial properties, or land.
2. DST Offerings: Passive Income Without the Hassle
Want to stay in real estate without dealing with tenants or maintenance? Consider a Delaware Statutory Trust (DST). These pooled investment vehicles offer exposure to various asset types like retail, industrial, or clean energy properties. You can enjoy consistent cash flow and capital appreciation without hands-on management as a passive investor. DSTs also provide an easy way to diversify across high-growth regions.
3. Opportunity Zones: Tax Incentives in High-Growth Areas
Opportunity Zones, established under the Tax Cuts and Jobs Act of 2017, promote investment in economically distressed areas. Investing in an Opportunity Zone Fund can defer capital gains taxes until 2026, with potential reductions if invested before specific deadlines. The biggest advantage? Hold your investment for 10 years, and you could eliminate federal taxes on future profits.
Consult Your Tax Professional
These strategies offer powerful tools to reduce your tax burden but come with specific rules and timelines. It's crucial to consult with a tax advisor or accountant to determine which option best suits your financial goals. Proper planning can help you reinvest savings and grow your portfolio.
08/23/2021