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.
021329
2 Replies
MinhT1
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.
rlwremo42
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.