Selling A Property With The Least Tax Consequences
If you purchase a property at 60% of current value. The property is in good condition, just need minor repairs. What is the best way to sell this property and encounter the least taxes? Is selling the best option?
Personally I would use a 1031 (buy another property) or put it in a self directed real estate IRA (again buy another property).
Kyle
If your ONLY criteria is avoiding taxes, sell at a loss.
Generally speaking,Property you acquire to flip is taxed at your ordinary income tax rate, and, your net profits are also subject to self-employment taxes.Property you acquire for the production of income (rental use, for example) or for future appreciation (raw land, for example) then sell after a one year holding period, qualifies for the long term capital gains tax rate (currently 15% max)Property you acquire to use as your primary residence, qualifies for the capital gains exclusion of up to $250K per taxpayer, it you own and occupy the property for two of the five years prior to sale.Your tax liability is based upon how you plan to use the property and upon how quickly you plan to sell.
For property you use for a qualified investment use, you also have installment sale tax treatment and 1031 tax-deferred exchange opportunities available as well.