If you are starting to be successful in property investment, you will know the rush of being able to buy and sell property for a profit. However, one major hurdle for property developers is capital gains tax. This tax can severely impact the amount of profit you can make by flipping properties; therefore, it can disincentivize investors.
If you are getting started in property investment in Florida, it is important to understand the opportunities that you have to avoid or reduce capital gains tax. By implementing certain strategies, you may be able to increase your profit margins significantly and make more fruitful investments in the future. The following are some ways in which you may be able to do this.
Wait more than one year before selling
One strategy that property investors make is to buy and sell properties rapidly. However, if you wait more than one year before selling, you will be subject to much lower capital gains tax rates. It may be more profitable to engage in extensive renovations that take more than one year and increase the value of the home significantly for this reason.
Deduct renovation costs
Home improvement costs are tax deductible. Therefore, it is important that you keep track of the costs of all renovations.
Consider 1031 exchanges
1031 exchanges make it possible for capital gains tax to be deferred. To benefit from this, you must purchase a like-kind property within 180 days of selling the initial property.
If you want to avoid capital gains tax as a property investor in Florida, it is important that you understand the wide range of options available to you.