Follow Patrick Linkedin Facebook
Email Patrick Email
Jan 16, 2017

Strategies For Avoiding Capital Gains Tax

Sponsored Content provided by Patrick Stoy - Mortgage Consultant/Owner, Market Consulting Mortgage

For many people, the aftermath of the holidays is associated with the disposal of Christmas trees, tinsel and decorations. It’s a time of year filled with resolutions and black-eyed peas, workout gear and the stress of facing those credit card statements from December. 

Finding a way to save money and keep more of those hard-earned funds in the bank is a common goal for many people, especially at the start of the year. Considering all the costs and headaches that owning a rental property can bring, it is easy to see why so many investment properties hit the market in January. 

The inevitable certainty of having to pay capital gains taxes will darken the mood of any investor or rental property owner.  Dreams about a hefty paycheck and a nice return on all the blood, sweat and tears that have been poured into a rental property can become just that - dreams.

It’s easy to see how finding a way to reduce capital gains tax - or avoid it altogether - could quickly become an investor’s sole purpose in life.

On a positive note to start the New Year, many believe that President elect Donald Trump is likely to reduce the capital gains tax. This has many property owners interested in delaying the realization of a capital gain opting to wait and see what Trump will do.

To provide a bit of backstory, having to pay capital gains taxes is actually a good problem to have. This is because capital gains taxes only pertain to people who have had a rental property for at least a year and have made a profit on it. Tax rates vary from zero to 20 percent, depending on the taxpayer’s adjusted gross income.

Conventional wisdom holds that a 1031 exchange is one of the best strategies for avoiding the payment of a capital gains tax. A 1031 exchange is when an investor swaps out one rental property for another of ‘like-kind’ or similar value. Since the funds are held in a trust until a replacement property is identified and purchased, the investor is allowed to defer the payment of capital gains taxes.

In light of the market appreciation we have seen over the past few years, an exchange might not be the best idea for reducing capital gains taxes anymore. Instead it may be worthwhile to consider the following strategies for avoiding capital gains tax:

  • Deferred Sales Trust – This is when a rental property owner creates a trust prior to the sale of the property. The trust then sells the property to a buyer, using a Realtor as an intermediary.The net proceeds from the sale are held in the trust, which uses the funds to invest in stocks or mutual funds at the property owner’s direction. The property owner is also allowed to carry a loan note back from the trust.
  • Charitable Remainder Trust – Setting up this type of trust can provide income for life for the property owner or anyone they specify. As the name implies, any remaining assets left over after the remaining beneficiary dies would pass along to the charity that was designated when the trust was created.
  • Installment Sale – A property owner who chooses to offer a lease/purchase option can defer some capital gains by doing an interest-only note on the property.
Of course, it is always a good idea to consult a tax specialist prior to making a decision.  If you have further questions about the mortgage process, please contact me at the number below.   

Patrick Stoy (NMLS Numbers 39527 and 39166) has 16 years of mortgage lending experience. Patrick is CEO of Wilmington-based Market Consulting Mortgage, which he started in 2005 with a mission to build lifelong customer relationships by providing real value. To learn more about Marketing Consulting Mortgage, visit Patrick can be reached at [email protected] or 910-509-7105.

Other Posts from Patrick Stoy

Mcm 14jan insight
Ico insights


Burrus rob headshot 300x300

Things to Think About When Filing 2017 Business Tax Returns

Robert Burrus - Cameron School of Business - University of North Carolina Wilmington

Dram Shop Cases & Underage Purchasers: What NC Business Owners Should Know

Chris Hinnant - Barnwell Whaley Patterson & Helms, PLLC
Dave hoff heashot 300x300

Speed and Reflecting: Dichotomy or Complementary?

Dave Hoff - EASI Consult

Trending News

Off The Beaten Path, These Cafes Are Worth Special Trips

Jessica Maurer - Mar 14, 2018

Developer Again Seeks Military Cutoff Rezoning With 'less-intensive' Plan For The Avenue

Cece Nunn - Mar 16, 2018

Steak N' Shake Still Aiming To Establish Wilmington Presence

Jessica Maurer - Mar 14, 2018

Marina Grill Opens Today At Port City Marina

Jessica Maurer - Mar 14, 2018

Toys R Us Demise Could Put Valuable Wilmington Property On Market

Cece Nunn - Mar 15, 2018

In The Current Issue

Fort Fisher Aquarium Volunteer Honored

N.C. Aquarium at Fort Fisher volunteer Rusty Burrow recently received the organization’s top volunteer honor....

MADE Winners - Supporter Category

Eclipse Artisan Boutique is the MADE Winner in the Supporter Category....

Some Buyers, Sellers Await School Maps

Uncertainty about school districts could affect whether parents buy or sell their homes at all at a given time....

Book On Business

The 2018 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!



WilmingtonBiz Expo - Keynote Lunch with John Gizdic, CEO, New Hanover Regional Medical Center
Wilmington's Most Intriguing People of 2017
2017 Health Care Heroes