Avoid Capital Gains by Paying off another Mortgage?
Hello All! Haven't found this answer. If I am selling an investment property (1 year primary, 6 month months rental investment), and take the $76,000 gain to pay down another rental investment property's mortgage in Colorado, does this avoid capital gains tax? Any help is greatly appreciated!
No - there is no way to avoid the tax with the scenario you describe. If you want to move back into the property for another year (thus making it your residence in two of the past five years, you can avoid the tax on the gain).The only way to defer the payment of taxes on the gain is a 1031 exchange. Unfortunately you will need to purchase another property to leverage the 1031. Your existing property does not qualify. This is not my area of expertise but I believe what I say to be accurate.
Thank you!!! I thought this might be the case but I had to confirm. Sounds like I need to start shopping for another investment property as I have a buyer and a price lined up for my old rental home.
You'd need to live in the property for 2 out of the last 5 years - can exclude up to 250k in capital gains or do a 1031 exchange, if I'm understanding this correctly.
IT doesn't sound like your set up to do either, but you're close. I'd try and finagle a little bit to save on those taxes somehow
No - Paying down a mortgage(decrease in liability) does not decrease the capital gains you have.
-
CPA
- Basit Siddiqi CPA, PLLC
- 917-280-8544
- http://www.basitsiddiqi.com
- [email protected]