Here are three ways you can avoid capital gains taxes on your home sale.
If you’ve ever sold your home, you know how great it feels to finally close. However, your celebration could be cut short when you see how much you need to pay in capital gains taxes. That’s why we want to talk about three ways you can avoid capital gains taxes when you sell a property:
1. See if you qualify for the Section 121 Exclusion. This exclusion lets you completely avoid capital gains taxes as long as you made less than $250,000 on the sale of your principal residence. For married couples, the cap goes up to $500,000. If you qualify under either of these requirements, you can skip the rest of this blog post since you have nothing to worry about.
2. Reinvest in tax-efficient outlets. If you sell a property, but you don’t qualify for the exclusion, you can reinvest your new revenue in tax-efficient outlets, such as Roth IRAs, 401(k)s, etc. If you have questions about this, give us a call. We can set you up with a financial expert to help you navigate this tricky situation.
3. 1031 exchange. You’ve probably heard a lot about this option because it is so clean. Essentially, if you sell a property, you can reinvest the revenue from the sale into a “like” property and defer your capital gains taxes. A “like” property is a pretty loose term, so make sure you talk to an accountant or financial expert before you go ahead with anything. Here in Utah, we have another level to this called an “opportunity zone,” but we’ll save that topic for another video.
This is a pretty complicated topic, but it’s important that you make the best decision for yourself. We can help you navigate this tricky field and get you in touch with experienced experts, so give us a call or shoot us an email if you have any questions. We look forward to hearing from you!