Selling real estate is one of the most impactful financial decisions you make. Understanding taxes, especially capital gains, can make the difference between simply selling a property and creating a lasting legacy.
When you sell your property for more than you paid for it, the profit is called a “capital gain.” If the property was owned for less than a year, the capital gain amount is taxed as ordinary income. If held longer, it’s taxed at a lower federal rate (0%, 15% or 20%), plus state taxes. But there are ways to minimize these taxes.
The primary residence exclusion benefit allows eligible homeowners to exclude up to $250,000 of capital gains for a single owner and $500,000 for married owners filing jointly, if they’ve lived in the property two of the last five years.
For investment properties, a 1031 exchange lets you sell and reinvest in another like-kind property, deferring capital gains and keeping more equity working for you.
A 1031 exchange can improve cash flow, diversify your portfolio and strengthen your real estate plan by passing on property with a stepped-up cost basis. By planning early and always seeking advice from a tax professional and real estate wealth advisor, you can prevent family disputes and create strategies to build, protect, preserve and transfer wealth for future generations.
THE IHARA TEAM OF KELLER WILLIAMS HONOLULU
1347 Kapiolani Blvd., Ste. 300, Honolulu, HI 96814
808-427-3006 | ihara@iharateam.com
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