1. One option is to use a 1031 like-kind exchange, which allows the investor to defer paying capital gains taxes by reinvesting the proceeds from the sale of one property into another similar property.
2. Another strategy is to use the Opportunity Zone program, which offers tax incentives for investing in designated low-income communities. By holding onto the investment property for a certain period of time, the investor can reduce or defer their capital gains tax liability.
3. Investing in a real estate investment trust (REIT) can also be a tax-efficient strategy, as REITs are not subject to corporate income taxes and are required to distribute at least 90% of their taxable income to shareholders in the form of dividends. This can provide a stream of income for the investor while also potentially reducing their tax burden. – QOZs are economically distressed communities where new investments may be eligible for preferential tax treatment in the form of deferring capital gains taxes.
– A 1031 exchange is a strategy to defer taxes by reinvesting the capital in a “like-kind” property.
– Installment sales can help maximize tax efficiency on the sale of an investment property by allowing the seller to receive payments in installments with interest over time, thus deferring taxes until later years. – Selling investment property during lower income years can help save on capital gains taxes by being taxed in a lower tax bracket.
– Contributing to a donor advised fund (DAF) allows for an immediate tax break while deciding which nonprofits to donate to later on.
– Developing housing targeted at lower income tenants can qualify investors for a low-income housing tax credit (LIHTC), providing a dollar-for-dollar reduction in federal tax liability. – Tax laws may change and significantly impact individual situations.
– Financial Advisors at Raymond James are familiar with tax provisions but cannot give advice on tax or legal matters.
– It is important to discuss tax or legal matters with the appropriate professionals.
https://www.raymondjames.com/commentary-and-insights/family-life-events/2023/12/28/tax-efficient-strategies-for-investment-properties
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