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Capital Gains Taxes in Real Estate Sales

How long do you have to hold on to an investment property so you can pay less capital gains taxes?

Came across this article that talked about capital gains taxes that I thought was relevant for investment properties owners as well as stocks and other assets:

A few years ago, to encourage taxpayers to save for the long-run, Congress offered a new capital gains rate 8% or 18% on assets held for five years or more starting in 2001. That provision has been taken over by the new capital gains rates on assets sold after May 5, 2003. So, if you were planning to hold onto a stock or a piece of rental property you bought in 2001 until some time in 2007, don't worry. You already qualify for the lower capital gains rate.

But don't forget about 1031 exchanges...:

When real estate investment properties are sold and immediately exchanged with a replacement property, the IRS does not recognize capital gains or losses. Therefore, taxes are not due, but are deferred until the final replacement property is sold outright. Certain restrictions apply to 1031 tax exchanges, such as the timeline to identify a replacement property and the use of an intermediary to handle the funds involved.

 

Learn more: IRS Tax Tips

Related Articles: IRS Is Your Friend



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