Please forward this error screen to 67. How can I reduce my capital gains taxes on the sale of vacant land? How much must I capital gains calculator investment property in capital gains taxes from the sale of a piece of undeveloped property?
Are there things I can do to reduce my tax bill? Hanging on until the gain qualifies for favorable long-term capital gains tax treatment if you’ve owned the property for less than a year. This could save a considerable amount of money, particularly if you are in a high income tax bracket. The lower your federal income tax bracket, the less tax you’ll pay on the capital gain. Receiving installment payments on a land sale from the buyer over several years could help you avoid a large lump sum payment that would raise your tax bracket and your tax liability this year. Instead of selling a property and investing in another one, which could generate a capital gains tax, many real estate investors conduct what’s called a 1031 Exchange. Also called an in-kind exchange, this type of transaction allows the real estate owner to defer capital gains taxes by selling one property and replacing it with another, similar one within a specified period.
There are a number rules to follow. The IRS requires those involved in the exchange to work through a neutral third party conduit called a qualified intermediary, usually an attorney or real estate professional. You must find a similar property within 45 days of selling the one you own. And to avoid immediate taxes, you must use all of the proceeds from the land sale to buy a replacement property. If you don’t need the money from the sale and feel generous, you can get a tax deduction by donating the land to a qualified charitable organization.