Understanding Capital Gains and Tax Laws to Maximize Your Wealth

By Ron & Eva Cedillo

Ron and Eva Cedillo Broker/Owners of Home Buyers Realty that has 20 Top Producing Agents selling over 400 homes per year. They personally sell over 150 homes per year with their aggressive marketing campaigns that net sellers Top Dollar Fast. “If we don’t sell your home in a time we agree upon we will buy it.”

We’ve been receiving a lot of questions lately about capital gains, tax laws, and 1031 exchanges, so we wanted to dive into these topics and provide some clarity. First and foremost, it’s crucial to understand tax laws, and a great resource for this is the official IRS website. Don’t be daunted by the idea of reaching out to the IRS directly – they are there to assist, and it’s often easier than you might think.

Let’s start with Section 121 of the tax laws, which offers an exemption for those selling their primary residence. If you’ve lived in the property for at least two of the last five years, you can be exempt from capital gains tax. The exemption increases to $500,000 when filing jointly with your spouse, which means $250,000 per spouse. We’d love to delve into more details on this, so feel free to schedule an appointment if you have any questions.

Now, when it comes to capital gains from selling an investment or rental property, there’s a common misconception that a 1031 exchange allows you to avoid paying taxes altogether. In reality, it’s a tax deferral strategy. To navigate this effectively, it’s essential to work with a reputable 1031 company in partnership with your escrow company and realtor. This ensures that you follow the proper procedures and don’t end up with unexpected tax obligations.

For a deeper understanding, consult your realtor and consider reaching out to a Certified Public Accountant (CPA) if you have one. If not, you can always turn to irs.gov or get in touch with the IRS directly for general information.

Now, if you’re looking to take your investment strategies to the next level and explore concepts like cost segregation and wealth accumulation, we recommend reading the book “The Win-Win Wealth Strategy” by Tom Wheelwright. It’s a fantastic resource to gain insights into these advanced financial topics. Alternatively, if you prefer a quick overview, reach out to us and schedule a time to chat with us. We’d be happy to provide more information.

Note: We are not CPA’s please consult your CPA for tax purposes.