From Los Angeles Business Journal · Kelly Garcia · · 1m 10s
Selling Rental Property Tax Strategies
Three tax strategies help California real estate owners maximize profits when selling rental properties.
In brief
Three tax strategies help California real estate owners maximize profits when selling rental properties. California real estate owners can defer taxes through 1031 exchanges, use DSTs for passive income, or pay upfront taxes to retain liquidity. Originally reported by Los Angeles Business Journal.
Selling Rental Property Tax Strategies
California real estate investors face federal capital gains taxes, california income taxes, and the 3.8% net investment income tax when selling rental properties.
Option 1: Pay Taxes Immediately
Selling outright provides immediate liquidity for retirement, investments, debt reduction, or other opportunities without real estate ownership restrictions.
Option 2: 1031 Exchange
Investors defer taxes by reinvesting in qualifying replacement property within 45 days of sale and completing the exchange within 180 days.
Option 3: Delaware Statutory Trust
Investors exchange property for passive DST interests to receive distributions without managing tenants, repairs, or maintenance.
Tax Planning Before Sale
Real estate owners should coordinate with cpas, real estate professionals, and investment advisors before selling to evaluate tax consequences and financial goals.
Key Question for Owners
The most important question is how much will be kept and how that wealth will work for the owner after selling.
The takeaway
California real estate owners can defer taxes through 1031 exchanges, use DSTs for passive income, or pay upfront taxes to retain liquidity.
