How to sell rental property without paying capital gains
Sell Rental and Get Hit With Huge Capital Gains Tax?
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chris is in san antonio texas hi chris
how are you
good afternoon guys hey what's up hi
dave so my question is or i guess yeah
my question
i have well i i became a landlord
about 22 years ago by default i have a
home in austin texas
i own it
but over that time that home has grown
significantly in value
so i'm i'm at a point in my life where i
might want to sell that home
but i just need some direction in
knowing if it's the right time for me to
do that and if i do decide to sell it i
want to know
if there's any way
to possibly avoid
capital gains tax
well certainly a hot real estate market
great time to sell real estate
and by and large that's a general
statement right
um
capital gains um
you're going to pay capital gains on it
my guess is you've been depreciating it
all these years right
yes
so you probably have an adjusted basis
close to zero the whole thing may be
gained
well yes yes that's true yeah
and uh so what's the house worth
i think we could list it for about 550
okay
yeah so you're going to have
geez
you have
60 000 in capital gains right
yes that's that's no more more than that
90. yeah
yeah okay but i have a i have a stable
renter who pays on time
um so he does a lot of his home
maintenance to the to the property so
the situation right now is kind of ideal
but again i don't know if the market's
going to continue to increase or if it's
going to
blow up and start you know declining in
value oh i think i think it's going to
go up in value unless you've got a
neighborhood problem
but overall real estate i don't think
real estate has a category is going to
go down
certainly there are neighborhoods that
deteriorate you sometimes people let
their property deteriorate that kind of
thing but i'm not worried about that
part of it
the only thing i know that you can do to
avoid capital gains if you choose now is
the time to sell it for you
would be what's called a 1031 tax
deferred exchange and that would involve
tr would involve selling the property
into an escrow account and buying
another piece of real estate out of that
escrow account
and it is it is in effect a trade
as if you've traded this property for
another property and so you roll your
basis
into the new property
uh and so if the new property's 550 000
or less you're gonna have zero basis in
it
and uh yeah
and the new property so you know you're
not gonna have anything you can
depreciate um unless you move up in
property and so you i mean you can buy a
million dollar property but obviously
you have to put up the money for the
difference
and so you're getting further into the
real estate business at that point and
it's just a matter of whether you want
to do that or not but for instance if
you wanted to buy
four houses in san antonio
um 150 000 houses you could do that
yeah and you know being a little you
know having out there in your area be
able to spread them out and you just
roll you're just rolling the money over
from that's what a 1031 allows you to do
it's kind of like a rollover in the
sense you're rolling it from the
the austin house over there otherwise
you're just going to be paying a 15
capital gains rate
or more if you sell it next year biden's
talking about raising the cap rate
capital gains rate
um so
um
i haven't looked at it lately dave uh i
thought that you uh didn't have to pay
on the first five hundred thousand
that's personal residence personal oh
because this is a rental oh it's been a
rental more than two of the last five
years it is now a rental
got it that explains
that's bad policy
hey i haven't owned any rental homes yet
so that was i'm a neophyte on that but
now that irritates me for you i'm glad
that's why i'll
bothers me yeah
well they um there's always a way to yes
raise taxes if you're a democrat i mean
that's just how it works
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