Do you currently own a rental property or have plans to invest in one?
Whether your rental home was purchased as an investment, inherited, or became a rental due to life changes — it can be a valuable asset when properly managed and regularly evaluated. That’s where we come in.
When it comes to buying or selling investment properties, planning your next move, or assessing the performance of your current rental, you need a Realtor who understands the financial side of real estate. We’re here to help you build a smart investment strategy, navigate the tax benefits and implications, explore 1031 exchange options, and connect you with a trusted team of professionals every step of the way.
What is a 1031 Exchange?
Internal Revenue Code Section 1031 allows investors to defer the payment of capital gains taxes when selling an investment property and exchanging it into another investment property. 1031 is one of the best strategies an investor can utilize to build up wealth in real estate.
What are Capital Gains?
Capital gains are a tax that is paid on any profits from a second home, investment property or primary residence if less than two years of ownership. Taxes are determined based on short-term (ownership for less than one year) and long-term (ownership for more than one year). Capital gains are collected by both the Federal IRS and the State of California. Capital gains can occur on a primary residence with ownership greater than two years if the profits are greater than $250,000, or up to $500,000 if you file a joint return.
How do you calculate Capital Gains?
To calculate possible capital gains, we recommend reviewing the CA 593, Real Estate Withholding Statement, link provided below. You will find the calculations to determine your profits on Part VI on page two of the 593 forms. The Federal IRS calculations may slightly vary and your CPA can validate the exact tax obligation, if applicable.
We always encourage our clients to have a conversation with their CPA to verify potential tax obligations or seek advice from an Estate Planning Attorney with more complex real estate scenarios.
Helpful Links:
CA 593, Real Estate Withholding Statement (document link under “Related Content”): https://www.ftb.ca.gov/forms/2020/2020-593-instructions.html
IRS Capital Gains Link: https://www.irs.gov/taxtopics/tc409