Just sold my duplex. How can I save on taxes that I will owe?

Question

Hello everybody! Okay so I will quickly describe the background details of the deal and want to know the best route to lower the taxes that I will owe after the sale of this duplex.

I have a 50/50 LLC with my business partner. In January 2019 we bought this duplex for $63,000 with 20% down payment.

In August 2021 we sold and closed on this property for $133,000.

Once all was said and done they sent us a $77,000 check.

Now we will be taxed on whatever profit we made and I don’t even know how much we will be taxed actually.

My question is should we buy some office materials like computers and desks to help lower the taxes that we owe?

Any other suggestions on what we can buy for the business to lower the taxes?

Thank you much!

Tanner Crawley · Answer

You could try opportunity zones. You would defer your gain until 2026 and future gains are tax-free as long as help for 10+ years.

Eamonn McElroy · Answer

My two cents...after selling costs and improvements you're splitting what is probably a very small gain on a very small property.

Buying computers and desks is not going to help you scale in the short-term. Save a portion for estimated taxes and roll what's left into the next property.

Don't let the tax tail wag the dog when you're just starting out. I don't see any need to talk to a CPA or tax advisor here based on what has been presented.

Bill B. · Answer

If you paid $63k and sold for $133k you’re splitting less than $70k in profit. You’ll pry owe about $5k plus some tiny amount of DR. But to delay the taxes you would have had to exchanged it for something else involving a QI. Luckily it’s a pretty cheap lessons learned. Especially if you wanted out for real estate anyway.

Ashish Acharya · Answer

You have already realized the gain so you have to pay taxes on it if unless you can harness any type of losses to offset it. You cannot avoid the taxes by just spending it, especially on the capital gain.

That is the tax planning strategy you need to discuss with your advisor. There are a few strategies you can use, but we wouldn't know which one works for you unless you actually talk to your CPA.

Just sold my duplex. How can I save on taxes that I will owe?

Just sold my duplex. How can I save on taxes that I will owe?

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