When you sell real estate, you may have a whole bunch of different tranches of tax. Investment property can be subject to NIIT (Net Investment Income) tax. Furthermore, if you depreciated the property while you were in ownership you may be subject to depreciated. If some of those components were rapidly depreciated you may have higher tax liability on that portion of the gain. Generally, depreciation is taxed at a higher rate than the preferred rates you get for normal capital gains. Certain accelerated depreciation can be taxed almost like ordinary earned income. Then you have routine capital gains on the appreciation that can occur over time. In some states and municipalities there can be local taxes applicable to your sale. It’s always a good idea to work with your local tax advisor who knows the nuances and practices in that particular area to get an illustration of what the fees and taxes will be at the state, federal and municipal level.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
© 2023 Copyright Jeffrey R. Peterson All Rights Reserved