1031

[Lisa Patton]

Do anyone know how long you can own a property without paying too much capital gains?

[Bill Exeter]

Originally posted by @Lisa Patton:

Do anyone know how long you can own a property without paying too much capital gains?

Hi Lisa,

The "cut-off" is 12 months.  Property held for less than 12 months is taxed at ordinary income tax rates.  Property held for 12 months or more is taxed at long-term capital gain tax rates.  However, if you hold property until you pass on, your heirs will receive a step-up in cost basis and you/they will never pay capital gain, depreciation recapture or Medicare surcharge taxes. 

Primary Residence

Is this your primary residence?  If so, you can exclude up to $250,000 in capital gain ($500,000 if you are married) from your taxable income if you have owned and lived in the property as your primary residence for at least a total of 24 months out of the last 60 months (2 out of the last 5 years).  Primary residences do not qualify for 1031 Exchange treatment.

Rental/Investment Property

Is this rental property?  If so, you can qualify for 1031 Exchange treatment.  If you wish to reposition your portfolio before passing on, you can structure a 1031 Exchange in order to continue to defer the payment of your taxes. 

Bill.