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How to Defer Capital Gains from Real Estate Sale?

Now that prices in the Real Estate market is at an all-time high, many people are interested in selling their property. One huge concern is the tax ramifications from selling your property at a gain. Here are several ways to defer your capital gains: (Note there are more exchange methods-please see types of exchanges on any qualified intermediary exchange website)

  1. 1031 Delayed Exchange – Most common method. Defer taxes to any type of property held for investment (multifamily, single family homes, retail center, office, industrial, warehouse, net leases, etc.). This is done by selling and exchanging to another property of equal value. You must follow the IRS 1031 exchange timeline and requirements.

  2. Reverse Exchange – Buy the desired asset first then sell.

  3. Installment Sale – Owners decide to carry financing to defer the tax gain for a specified number of years.

  4. Deferred Sale Trust – Your property is transferred into a trust that’s overseen by a third-party trust account manager. You will be the designated beneficiary. The trust will sell the asset and distribute the proceeds of that sale to you over a set time, as outlined in your installment agreement. Proceeds can be held as cash or reinvested. There will be no capital gains taxes until you receive the installment payments.

Overall, the four methods mentioned above are some of the ways to defer your capital gains. The IRS website outlines the requirements and regulations in detail for each method. If you’re interested in learning more about ways to defer your capital gains or if you’re looking for a knowledgeable person to help you through the process, please contact us at (818)915-9118 or by email!

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