If you own investment property and the time has come to sell it, then the taxes on that sale could make a big difference in the amount of money that you are able to net from the deal. And this, in turn, can have an impact on any subsequent purchase, payoff of debt, or other goal that you had for those funds.
Overall, if you have held the property for one year or less, any gain that you earn on the sale would be considered short-term. This amount would then be taxed at your ordinary income tax rate.
Alternatively, if you have held the investment property for one year or more, any gain that is earned on it would be considered long-term capital gain. And, based on the new 2018 tax laws, these gains would be taxed at one of three rates – 0%, 15%, or 20% – based on your overall annual income.
As an example, for a married couple who files their taxes jointly and has total taxable income of $77,220 or less, there will be no capital gains tax obligation. However, if you fall into this tax filing category and you and your spouse earn between $77,221 and $479,000 in 2018, the long-term capital gains rate is 15%. Likewise, for couples who fall above the income level of $479,000, there would be a long-term capital gains tax of 20% on the gain you made on your property sale.
Rather than paying any tax on the gain at all, though, you may opt to hang on to your rental property(ies), and instead turn over the time-consuming tasks to an experienced, local property management team.
If you own rental property in and around the Central Florida area, contact us for more details on how you can free up more of your time by delegating the day-to-day property maintenance and management duties, while at the same time continuing to earn an income stream.