As one of the world’s most desired investment real estate markets, Washington DC offers buyers historic curb appeal not found elsewhere, but what happens when it’s time to capitalize on your investment? No buyer purchases investment property with the intention of losing money, but one false tax move and that scenario could become reality. An in-depth understanding of real estate tax implications will serve any seller entering the investment real estate market well.
CONSIDER YOUR OVERALL TAX LIABILITY
Washington DC investment property buyers and sellers can often get tunnel vision when closing a deal. They forget to consider how a specific transaction will fit into the bigger financial picture of their household or business. Capital losses and capital gains are reported on IRS Schedule D and, so long as you held your investment property for more than 365 days, any gain or loss will be treated as long-term. Per IRS regulations, taxpayers can offset long-term capital gains with long-term capital losses, real estate or other, when realized within the same tax year.
Will you be exercising executive benefits upon retirement? Buying or selling investment property may be able to lessen the tax burden created by highly appreciated stocks and options. Call your CPA or seasoned investment real estate professional for more guidance.
COULD A 1031 EXCHANGE BE ON YOUR HORIZON?
If your Washington DC rental real estate has appreciated and you would like to avoid realizing large capital gains, exchanging your current capital asset for a new capital asset may make sense. While 1031 exchanges are sophisticated transactions and should be carefully structured by seasoned tax and real estate professionals, purchasing a replacement property with the proceeds of a current sale, can be a robust basis recapture strategy.
Sometimes even the most seasoned real estate investor finds him or herself in the middle of a bad investment. Vacancies, bad tenants, and the overall Washington DC real estate market can impact the outcome of a deal. By turning your investment real estate transaction into a strategic financial tool, you may avoid losing money to your buyer and the IRS. Before disposing of a capital asset it is crucial to discuss all available options with a seasoned investment real estate professional, Certified Public Accountant, and/or attorney.
For all your real estate investments, contact Gene Mock, Associate Broker, Premier Team, Keller Williams Realty 703-342-8100. He offers expert real estate advice on your investment real estate interests.
TAX CONSIDERATIONS WHEN SELLING WASHINGTON DC INVESTMENT PROPERTY