Capital Gains Tax & Real Estate 101

Capital Gains Tax & Real Estate 101

How to Use a Washington Hard Money Loan to Lower Taxable Profit

Every real estate investor wants to make money when selling an investment property. But it’s essential to be strategic.

Investors in the business of flipping houses or buying and selling rental properties know that profitable real estate sales can come at a cost. If the property you’re selling has significantly increased in value, you may owe a hefty amount in capital gains to the IRS come tax season.

Experienced real estate investors take steps to reduce or avoid capital gains tax. Here’s how!

How Does Capital Gains Tax Work in Real Estate?

Capital gains taxes are applied when you sell and make a profit on a real estate investment. Simply put, subtract the property purchase price plus expenditures (i.e., improvements and upgrades) from the sale price. Any gain made counts as a taxable asset and must be reported to the IRS for the year the property was sold.

Tax rates depend on several factors, including your income, marital status and – most importantly – length of property ownership. Gains are taxed both short-term and long-term. And investment properties don’t receive the same exclusions as a primary residence. So, it pays to plan ahead.

3 Ways to Strategize Your Real Estate Investments & Capital Gains

  1. The longer you own a rental property, the lower the capital gains will be when you sell. If the value of your rental investment has seen a sharp rise, consider converting the property into a primary residence for at least two years.
  2. Defer paying taxes on capital gains by reinvesting your profit in a “like-kind” real estate purchase. IRS Section 1031 allows investors to sell an investment property and buy another property at equal or greater value in the same tax year.
  3. Lower the amount of capital gains taxes on a rental property sale by taking qualifying deductions. Include property upgrades, repairs, renovations, and improvements; loss of rental income due to tenants’ lack of payment; closing costs from the property sale; and legal fees.

With some planning and know-how, you can reduce any capital gains tax and ensure a higher profit on your real estate investment.

Let Our Washington Private Money Loan Team Help

The more you know about the real estate industry the better you’ll be able to meet your investment goals. Gregory M. Russell has helped Washington real estate investors successfully build their portfolios for over three decades. We have a keen understanding of the market and what it takes to make a profit. Our equity-based, hard money loans provide streamlined financing when you need it without the hassle of a conventional lender. So, when you want to make deductible improvements or upgrades to an investment property that may help you lower capital gains and need money fast, our direct private loans are a great solution. Call 1-888-477-0444 to learn more or begin the loan process today. Or simply complete our online loan request form. It’s that easy!



Thanks for taking the time to read our blog. We have enjoyed bringing our shared experience in private money lending and the real estate industry to our work with investors throughout the Northwest for over three decades. We live in beautiful Southern Oregon, but consider Washington and Idaho, where we also provide our hard money loan services, our second homes!
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Greg & Rachel
Gregory M. Russell Hard Money Lender

Rachel and Greg Russell, Hard Money Lenders