Avoid capital gain tax on sale of property

[justspen1]

I am considering selling my rental property in California and buying one another in Arkansas.  How can I do this and avoid capital gains tax?

[Carl]

If you sell it for it's Adjusted Cost basis to break even, or lower to see a loss, then there is no gain to be taxed. Otherwise, if the property was your primary residence for at least 2 years of the last 5 years you owned it, counting back from the closing date of the sale, then up to $250K ($500K if MFJ) will be excluded from capital gains.

I've also heard that a 1031 exchange if done right, can delay (but not avoid) the capital gains tax. But I don't know that much about such transactions, and I also don't know how such a transaction will affect state taxes since in your case, it would cross state lines.

It used to be "back in the day" that you could sell a property, and if every penny of the gain was used to buy another property, then you could delay taxes on your gains. But that's been gone for about 20 years now. Basically, if you sell a property at a gain, you pay taxes on it. Period. It doesn't matter what you do with the proceeds either.