If you’re looking to sell real estate, you may have to structure the deal to make it acceptable to the buyer. But this could work to your tax advantage.
Strategy: Arrange a year-end “installment sale.” If payments are made in the year of the sale and at least one other year, you don’t owe all the tax due on a gain. Not only does this defer tax, it might reduce your overall tax liability.
However, you must watch out for a tax trap for sales to “related parties.” Fortunately, it’s relatively easy to avoid dire tax results.
Here’s the whole story: Under the installment sale reporting rules, only a portion of the gain is taxable in the year in which you receive a payment. Also, the taxable portion on the sale usually qualifies for favorable capital gain treatment.
Currently, the maximum tax rate for long-term capital gains is 15% or 20% for taxpayers in the highest ordinary income tax bracket of 39.6%. In add...(register to read more)
- Small Business Tax Deduction Strategies No matches