08-13-2024, 08:20 AM
"That's a great suggestion for Amrita! She could even invest the proceeds in something low risk and realize incremental gains that would not carry a high tax burden."
I'm the last person anybody should look to for tax advice. But as I understand it, this would be considered a long-term capital gain, and the tax rate would be a bracket that was dependent on other income generated that year. If one's income is low, the capital gains tax on a vacant land sale might be zero:
Long term capital gains rate
0%: Up to $94,050 (single) or $188,100 (joint) taxable income
15%: $94,051 to $583,750 (single) or $553,850 (joint) taxable income
20%: Over $583,750 (single) or $553,850 (joint) taxable income (these are unverified figures I found with an online search)
If too much income is an issue, the land would actually sell for more if owner financing was offered and the capital gains liability would be spread out over the term of the note, which, again, may create a zero tax liability situation. (If getting $100k for a property in one year creates a tax situation, getting $20k each year for 5 years may not). Plus, one could earn interest on the loan.
The other way to avoid taxes is a 1031 exchange, but that's really only for people looking to sell a property and buy another.
There are probably other loopholes to avoid capital gains taxes that I've never heard of as well.
I'm the last person anybody should look to for tax advice. But as I understand it, this would be considered a long-term capital gain, and the tax rate would be a bracket that was dependent on other income generated that year. If one's income is low, the capital gains tax on a vacant land sale might be zero:
Long term capital gains rate
0%: Up to $94,050 (single) or $188,100 (joint) taxable income
15%: $94,051 to $583,750 (single) or $553,850 (joint) taxable income
20%: Over $583,750 (single) or $553,850 (joint) taxable income (these are unverified figures I found with an online search)
If too much income is an issue, the land would actually sell for more if owner financing was offered and the capital gains liability would be spread out over the term of the note, which, again, may create a zero tax liability situation. (If getting $100k for a property in one year creates a tax situation, getting $20k each year for 5 years may not). Plus, one could earn interest on the loan.
The other way to avoid taxes is a 1031 exchange, but that's really only for people looking to sell a property and buy another.
There are probably other loopholes to avoid capital gains taxes that I've never heard of as well.