Would You Volunteer To Pay Taxes?

Paying taxes on the sale of your real estate investment is indeed voluntary. You do not need to volunteer to pay the IRS more than it deserves…

But if you MUST cash out your investment property there are a few ways to reduce or defer your tax on the gain to minimize the impact on your bank account.

Section 1031 Alternatives

While growing your real estate portfolio, you likely used Section 1031 to avoid paying capital gains taxes when you acquired bigger and better properties.

But now, when you want to cash out, Section 1031 is not the vehicle of choice (since it requires you to invest your gains into a larger property).

So if you need the liquid cash for a reason other than investing in larger properties, your options are limited when trying to minimize your capital gains taxes.

So what do you do?

Here are three strategies we can help you with when you want to cash out some or all of your real estate profits: 

1. Use the combination of a charitable remainder trust and a wealth replacement trust to avoid taxes, increase personal cash flow, and increase the estate distribution to your children.

2. Use IRC Section 721 to invest the property in a real estate investment trust and defer taxes.

3. Use an installment sale to pay taxes slowly.

If you are considering selling your investment property at a gain and you are not sure how much you will pay in taxes and want strategies on how to minimize your taxes, book a call below.

Get a Free Tax Savings Consultation

Pinewood Consulting’s CPAs will help you assess your tax savings potential through a free consultation. Book yours today with Chad Pavel, CPA.