The real estate market has been on an upward trajectory for the past few years and it’s easy to see why. 

If you own investment properties, the value of your property has no doubt doubled in value. You may be looking into cashing out or getting ahead of the potential future increases in tax rates with your properties. 

Right now is definitely the time to take advantage of the hot market and sell! 

You’re probably thinking “but what about the massive tax bill I’m going to have to pay from the sale of my property. Is there any way to avoid paying capital gains tax legally?”

Actually, yes!


There are quite a few strategies that can help you avoid paying capital gain tax on your real estate investment property. Here’s six strategies that can help lower your capital gains tax.

One strategy is using a 1031 exchange. A 1031 exchange is a tax deferral strategy and is the best way to invest in real estate without paying any capital gains taxes. 

It allows you to sell one property and use those profits from a sale towards purchasing more income producing properties within a certain period of time. 

This can be a very powerful wealth building tool because your 1031 exchange deferrals can continue through as many exchanges as you like!

Second strategy is keeping good records of capital improvements. 

Smaller repairs can be expensed immediately to reduce your taxable income, but bigger repairs need to be spread out over time. If you’re putting up siding or replacing a roof, that expense will cost you several thousand dollars. It’s important to make sure you get the full tax credit for this expense.

Third strategy is to hold onto the property for at least one year. In general, holding onto properties for a few years doesn’t get rid of your capital gains but if you’re flipping houses in under a year you will be paying on short term capital gain. Short term capital gain rates are typically higher ranging from 10% to 37% whereas long term capital gain rates range between 0% to 20%.

Fourth strategy is to give the house to a family member or friend as a gift. This way allows you to avoid paying tax altogether because you donated the home.

Fifth strategy is to contribute to your retirement accounts, IRAs, 401(k)s and 529 plans allow investments to grow tax-free or tax deferred.

Sixth strategy is to sell your assets in a low tax year. Meaning if your income is not going to be for the year, that would be the time to sell your investment property. Remember, under the current tax law, long term capital gains can be taxed at a 0% for the first $80,000.00. Sweet!


When it comes to taxes, there’s no such thing as a small difference. The type of gain that results from an asset being sold can make all the difference in the amount of taxes you’re responsible for!

Have questions or need some advice? Contact me today!