How to Sell Land and Not Pay Taxes | How to Avoid Tax on a Land Sale
If to want to sell you land not pay the tax, how it is possible. If you are thinking How to Sell Land and Not Pay Taxes. So, every thing is possible it usually depends on you how you suffer from that. Here, are some steps given for How to Sell Land and Not Pay Taxes. Follow the steps for best and easy process.
How to Avoid Tax on a Land Sale
Steps of How to Sell Land and Not Pay Taxes
The IRS consider land to be a capital asset just like other types of real estate or shares of stock. A such, when you sell it, you will b liable for capital gains tax if the sale is profitable. Furthermore, if you depreciated land improvements, you will also need to pay depreciation recapture tax on them. however, there may be ways to dispose of your land without incurring tax liability.
Sell at a Loss
If you sell your in the loss price that you have purchased from the other with the low price. Then the valve after adding up any depreciation that you claimed, you would not have to pay any capital gains tax. While this is not always a desirable option. It can be a way to get out of the expenses of holding land for which you have no other use.
Carry Back Interest Only Seller Financing
Another way for payment of capital gains tax is offer to finance the property for the buyer. If you finance it on an interest of only basis then the buyer will make interest payments but will not pay anything toward the principal. Leaving your capital gains locked in the property. This strategy has two drawbacks. Once the buyer pays off the loan, you will receive the principal and realize your gain, so it is only a temporary solution. The drawback is that any down payment will also be treated as portion of your capital gain, so it does not completely protect you from paying capital gains tax.
The Cost of Paying Tax
If you are decided about the selling of your land and pay also the tax. You could be subject to as four different taxes. Your profit on your land will be taxed at the federal capital gains rate. The rates of the capital gains rate are which is 15 per cent or 20 per cent. Assets held over one year, it is depending on your income. You could also be subject to a 3.8 per cent surcharge tax for Medicare as well as 25 per cent depreciation recapture tax on may depreciated land improvement. Finally, you may also have to pay taxes to your state on the profit.