There are many people that invest in property as they plan for the future and for retirement. However, when you sell that property and try to cash out on your investment, you can get hit with some steep capital gains taxes. This can have huge financial implications if you aren’t careful. However, there are some steps that can be taken to help minimize the blow of capital gains taxes. Mark Dicus & Company is here to talk about some of the strategies that can be used to lower the capital gains that you owe after selling property.
Understanding What Capital Gains Taxes Are
When it comes to selling a piece of property, there are capital gains taxes which are a levy imposed on the profit that you make from the sale. Capital gains are split up into two different groups, short-term and long-term capital gains. Short-term gains are imposed on properties that have been owned for less than one year. Long-term gains are are going to get preferential tax rates because the person has owned the property more than one year. Here are some ways that you can better your tax position when it comes to capital gains:
– Primary Residence Exemption: For those that are looking to save money on capital gains taxes, there is no better way to do it than to use the primary residence exemption. When you have lived in that home or property for 2 of the last 5 years, you can claim this exemption which is huge. You can exclude $250,000 or $500,000 for couples, when you sell the property. You will need to prove with paperwork that you have spent at least 2 of the last 5 years at this residence. It’s huge tax savings.
– 1031 Exchange: If the primary residence exemption isn’t an option for you, it is always an option to take advantage of the 1031 exchange. This means that you use the profit from the sale of your property and reinvest it into another similar kind of property. You need to make sure that you are following the guidelines of this rule, but you can find that it is a great way to protect your wealth. It is vital that you work with a professional on this since not all properties will qualify.
– Capital Improvements: Another tool to help protect your profits from a property sale is capital improvements and adjusted basis. You can invest the money in improving your capital investments through renovations. This can help to reduce the money that would be subject to capital gains. Just make sure you keep detailed records of the improvements.
Bookkeepers, Accountants & More in Summerlin, North LV, Henderson, Lone Mountain Village & Greater Las Vegas, Nevada
If you have profit from the sale of a property and would like to protect it, you can turn to Mark Dicus & Company to help you map out your options. We will make sure that you’re following the appropriate guidelines necessary to protect your money. Call us today!