Every real estate transaction includes some transfer of currency; this also means that you have to pay taxes on the income. The exact rate of tax will vary from country to country, as well as from year to year, but the one rule that is common is that you have to pay taxes. This can often be a hefty amount, as capital gains are often taxed at higher rates than income. However, the good news is that you can legally avoid paying taxes. Below are ways that you can do this.
Donate Your Real Estate Property
When you donate your real estate property, you can treat it as a tax write-off; this can help you retain much of your after-tax income. Although it may sound ridiculous to donate a property bought with your hard-earned money, especially when you had planned to make profits out of it, this is the best option for wrong investments. This is because you can get a tax write-off.
Avoid Paying Taxes on Your Primary Residence
According to real estate laws, you can exclude up to $250,000 off your capital gains when you sell a property that is your primary residence. This amount extends to $500,000 for married couples. This means when you sell your property to buy another one, you get a $500,000 tax write-off as a couple. This can help you generate some capital for your needs.
Exchange Traded Funds
If you want to invest in real estate, but you do not want to pay taxes on capital gains, simply invest in Exchange Traded Funds. These funds will invest in real estate companies for you, so you have no tax worries.
Thus, these are some ways to legally avoid paying taxes on your real estate transactions. Take a look at these methods to see if one of them is right for you.