Sell vs Hold Tax question. I am building duplex that I was intending to hold for rental income. I’m considering selling once construction is complete to use the capital for a larger deal. Land cost = $45k. Construction cost = $355k. So all in $400k. Say I sell for $500k. How will the $100k diff be handled? Short term capital gain (I would think not)? Standard income? Any insights would be appreciated.

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I’m not an expert, but couldn’t you put the $100k in a 1031 exchange?

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Hold a year and sell through 1031 exchange to defer your tax from gains. Buy another piece of land or a rental that cash flows.

In general anything under a year is standard income

likehelpful

That’s helpful. Thank you

You should talk to a tax professional. There are some other elements that will play into your calculation (time held, how the loans are structured, etc.)

I agree with trying to hold at least a year to get out of short term gains land, then 1031 exchange into the next property

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Short term capital gains are taxed at ordinary tax rates.

Thanks for the post. Good article though very complex subject. My take-away is, to be safe, hold for one year after completion of construction (CO) and you should be safe.

Less than 1 year = taxes like regular income
More than 1 year= capital gains tax (better rates)
If you 1031 exchange you can put the proceeds into another house and defer the taxes.
Also, if you live in it for 2 years you won’t have to pay any taxes on it if you sell shortly after.

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