How Is Investment Real Estate Taxed When You Sell Your Home in Pinecrest?

The cozy, affluent village of Pinecrest is one of the most desirable places in South Florida to purchase a second residence, whether you use it for a vacation home or as a pure investment to provide year-round rental income as well as receive certain tax deductions.

However, before purchasing luxury real estate Pinecrest as an investment, or if you already own a property and are preparing to sell it, you need to fully understand how that property is taxed when it is sold. Besides working with an experienced real estate agent to handle all aspects of any transaction, owners are also advised to meet with a Florida tax account to understand any tax implications fully. This is important whether you are a Florida resident or live in another state or country.

A full understanding of how investment real estate is taxed when you sell is important because the cost of taxes can dramatically affect your projected return on investment, both while you own the property and when you sell it. The cost of consulting with a tax attorney is well worth it, considering the potential cost of making a mistake by not filing or defaulting.

There are many reasons to invest in Pinecrest real estate. It’s a village of about 20,000 residents located just 20 minutes south of downtown Miami that has a unique suburban feel all its own, with exclusive neighborhoods that include homes along a handful of canals. The quality lifestyle is enhanced by the many amenities of the Greater Miami area, including exclusive country clubs, nature preserves, and all the incredible nautical activities available on Biscayne Bay and beyond. Pinecrest is family-friendly and safe, with top-rated schools and great parks.

As one of the richest communities in the Sunshine State, Pinecrest is known for fabulous single-family homes, including mansions on large lots surrounded by lush tropical landscaping. Many have backyard swimming pools, and some are located on canals. These luxury homes are wonderful not only for primary residences for families but for various investment purposes. They make for wonderful vacation homes that can be rented out when owners aren’t using them or rented out full-time to take advantage of wealthy visitors who prefer to stay in well-appointed mansions when they are visiting South Florida.

Anyone interested in owning Pinecrest investment property should fully understand the entire tax structure, not just how it applies when it comes time to sell that property. That way, there should be no misunderstandings or disappointments if there is a tax bill.

For instance, everyone knows that there is no income tax in Florida, which is what makes the Sunshine State a popular place to live. That’s one reason why there has been an influx of people moving from high-tax states to Florida, where no income tax means they have more disposable income to spend on housing and enjoying the great outdoors lifestyle.

However, residents are responsible for paying property taxes, as they are in other states, and for paying federal taxes if they make money from renting out a home and when they sell a rental property. That’s why people must understand taxes before purchasing an investment property. In many cases, people hold onto investment property for many years. However, situations could arise where they need to sell. There are other instances when owners sell one investment property and plow the profits into another investment property.

When you sell Pinecrest real estate that has been used for investment purposes, it will be subject to federal capital gains tax. This tax rate for U.S. residents is generally 15% to 20% if you owned the residence for more than a year. Foreign nationals who are selling Pinecrest investment property are also subject to capital gains tax and need to be aware that they could face a higher tax rate. That’s why anyone entering into a transaction must first consult a Florida tax attorney.

Capital gains tax is what you will pay on the profit you have made on the property’s appreciation since you purchased it. In many cases, your property might have appreciated greatly during the last several years as the price of real estate has boomed as out-of-staters have flocked to the Sunshine State.

Profit on Pinecrest homes for sale is calculated as the sale price minus the purchase price minus expenses. A tax accountant will have the full list of qualifying expenses. That’s why accountants and real estate professionals alike encourage owners of investment real estate to keep accurate records of every expense they incur for both the purchase and sale of the property, as well as other expenses related to the home. For instance, you should even keep records of all travel-related expenses to visit your investment property. Federal law requires you to file a tax return when you sell an investment property.

People selling Pinecrest investment real estate should learn about the 1031 Exchange program. Anyone who sells investment property is eligible to use this program, which allows them to defer the payment of federal gains taxes that normally would be due when a sale is finalized. This occurs when owners reinvest the profit in a similar property of equal or greater value.

To take advantage of the 1031 Exchange, sellers must put the proceeds of the sale of their property into an escrow account and then identify up to three properties targeted for investment within 45 days. He or she must then finalize the purchase of one of those properties within 180 days of the sale of the original property.

These are the major points to know about how investment Pinecrest real estate is taxed when it is sold. When you’re ready to sell, contact The Elena Kemper Group for unmatched client services.