SS62: Understanding Capital Gains as it Relates to Real Estate Investing

Capital gains are taxed at different rates than ordinary income; but what constitutes a capital gain? In this episode, Charles discusses capital gains and how they affect real estate investors.

Watch The Episode Here:

Listen To The Podcast Here:

Talking Points:

Make sure to speak to your tax professional for individualized advice
Real estate has a number of tax benefits and capital gains are one of those it allows you to pay a lower tax rate on assets owned over 1 year.
Long-term capital gains tax rates range from 0% – 20% depending on your income; where ordinary income tax rates top out at 37%; capital gains allow you to pay a much lower rate on certain assets owned over 1 year
Short-term capital gains are taxed at ordinary income rates
In this episode, I am discussing capital gains on investment properties
But, if you are selling your primary residence and you are single, you will pay no capital gains tax on the first $250,000 of profit (excess over cost basis). Married couples enjoy a $500,000 exemption. There are, however, some restrictions; so, speak to a tax professional.
There are 3 main ways you can benefit from these rates:
- Selling stock (owned more than 1 year)
- Selling a rental property (owned for more than 1 year)
- Selling a business
Wages, rental income, and income from flipping homes (owned less than 1 year) are taxed at ordinary income tax rates. Just holding those properties for 1+ years will allow you to pay a much lower rate.
A closing thought is; if you own a good rental property and you are just looking to purchase a new property and use some of the equity you have built up; I would suggest refinancing the rental property or if rates have increased since when you mortgaged the property last; maybe look into a supplemental loan or second mortgage to try and access that equity tax-free.
Real estate has so many benefits for real estate investors to pay little to no taxes but make sure to speak to your tax professional for individualized advice

Transcript:

Charles:
Welcome to Strategy Saturday; I’m Charles Carillo and today we’re going to be discussing capital gains as relates to real estate investing. Make sure to speak to your tax professional for individualized advice. So real estate has a number of tax benefits and capital gains is one of those and allows you to pay a lower tax rate on assets owned over one year long term capital gains rates range from 0% to 20%, depending on your income where ordinary income tax rates top out at 37% capital gains allows you to pay a much lower rate on certain assets owned over one year. Now, short term capital gains or tax at ordinary income rates. And these are for assets that are usually held for less than year. In this episode, I am discussing capital gains on investment properties, but if you’re selling your primary residents and you are single, you will pay no capital gains tax on the first $250,000 of profit excess over cost basis.

Charles:
Married couples will enjoy a $500,000 exemption. There are however, some restrictions, so speak to a tax. So there are three main ways you can benefit from capital gains rates, selling a stock to own more than one year selling a rental property owned more than one year in selling a business. Now wages, regular ordinary dividends and rental income and income from flipping homes own less than one year are taxed at ordinary income rates, just holding those properties or assets for one plus years will allow you to pay a much lower rate. A closing thought being though, if you own a good rental property, and you’re just looking to purchase a new rental property and use some of the equity you’ve built up, I would suggest refinancing the rental property, or if rates have increased since when you mortgage property lasts, maybe look into a supplemental loan or a second mortgage to try and access the equity tax free real estate has so many benefits for real estate investors to pay little or no taxes, but make sure to speak to your tax professional for individualized advice. So I hope you enjoyed, please remember to rate review, subscribe, submit comments, and potential show topics at global investors, podcast.com. Look forward to two episodes next week. See you then

Announcer:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar, LLC, exclusively.