Think Real Estate Has Peaked? Here's How to Sell Without a Huge Tax Bill
The stock market has officially entered bear market territory, and the real estate market may not be far behind it. While we don't recommend knee-jerk selling when the market turns downward, it's understandable if you want to sell a property that has had a huge price increase over the past few years. The problem is taxes.
It's likely that you'll pay at least 15% capital gains tax on the gain and another 25% on the recaptured depreciation. For example, if you bought a rental for $200,000 a few years ago and can sell it for $350,000 now, you're looking at $25,000 in potential taxes at least, on top of the fees it will take to sell the property.
1031 exchanges could be your best friend. They allow you to sell your property and not pay taxes, as long as you reinvest that money into a new real estate investment. Let's go over how it works.
Source Fool.com
