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Returning Member
posted Apr 17, 2023 10:23:17 AM

Can I avoid capital gains on the sale of a rental property by putting the gains into an existing rental property? (e.g. pay off mortgage, repairs, etc.)?

I have multiple rental properties, all with mortgages. I know I've seen articles saying if I sell a rental I can avoid capital gains by purchasing a new rental property. 

But what about existing ones? Can I avoid capital gains by taking the 'gain' amount and say putting it towards the mortgage of one or more existing rental properties?  I've not found any mention of that anywhere.

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2 Replies
Expert Alumni
Apr 17, 2023 10:41:29 AM

You can defer the taxation of your capital gains by doing a 1031 exchange, i.e, by buying a like-kind property.

 

But you cannot "invest" the capital gains in existing properties to avoid paying tax on the capital gains.

Returning Member
Apr 23, 2023 2:25:58 PM

Thank you for the answer. 

 

As with many things in the tax code, it doesn't make sense that there is a difference, but I appreciate your quick reply in answering my question.