Selling Investment Property Englewood
There are different reasons for selling investment property in Englewood, but whatever reason you have for selling, one thing you need to be aware of is the payment of taxes.
Yes, when you sell investment property, there are a number of taxes you must pay to the government. Still, there are tricks you can use to avoid paying taxes, especially if you are selling investment property Englewood to your child, for instance. Remember, for a house you have lived in for at least two of the past five years, you won’t have to pay extraordinary capital gains taxes, but if you are selling a property that you haven’t been using as your primary residence, the story will be a little different.
If you own a home and have lived in it for the past two out of the last five years, you won’t be charged any taxes on capital gains of up to $250,000 for single homeowners and an impressive $500,000 for married couples. If the home is not your primary residence, it’s not such an easy thing to avoid paying taxes when you sell it. It gets even worse if the house in question is investment property because you must pay taxes on the profits. Even though the taxes on the sale of investment property can be significant, keep in mind that your taxes would be calculated at capital gains’ rates and not at ordinary tax rates, which would have been substantially more.
If you can plan ahead and take advantage of the 1031 tax-deferred exchange, you can sell an investment property and defer paying all federal income taxes. Using an exchange means that you are selling one property to use the money to buy another investment property. Keep in mind that once you make this pledge, you will be granted up to 45 days to designate the other property to replace the sold one and up to 180 days to close the deal on a permanent replacement. In short, if you plan on buying more investment property after selling the current one, this is a great channel to use for anyone looking to avoid paying federal taxes.
Assuming you have no plans of selling investment property Englewood and then re-investing the money into other properties, the best thing to do would be to talk to an experienced accountant and see the best option to avoid paying hefty taxes. Otherwise, you may also choose to sell the property to your child in installments. In this way, you will become his/her lender and thus, they will have to make the payments in small amounts until they complete the agreed amount. It’s not as easy as it might seem, but installment sales can at times get complicated and without the knowledge of key issues, you might still find yourself in hot soup due to tax-based issues. In short, make sure you seek professional assistance before proceeding with the decision to sell.
There are several ways you can use to restructure the contracts so that paying federal income taxes as you receive the money from your child is a lot easier. Of course, you will still pay the taxes as required, however, you might be allowed to pay them at a lower rate and thus pay over a longer period of time than expected. This might be a better option for you or not, so make sure you decide carefully. The most important thing you need to know is what your taxes might be in case you sold the house outright compared to the taxes needed when selling investment property in Englewood on an installment basis.
There are changes looming in the income tax code and in case they do happen, there could be some advantages of selling investment property on an installment basis. However, since we can’t tell the kind of changes that will be introduced and how the said changes might actually affect you, it’s a better idea to ensure that you get the most up to date advice from your local real estate attorney and tax preparer in order to correctly document the sale.
If you want to complete the sale of investment property Englewood in less than a week, though, call Denver Property Flip on (720) 370-9595 and you’ll have an all-cash offer within 24 hours.