I am selling an investment property without doing a 1031 exchange and would like to minimize, or at least spread out the tax burden of the capital gains. Especially given that I expect to be in a lower tax bracket in the next few years.
Example: (tried to use round numbers to keep it simple)
If I sell the house in 2022 for $300k at a $100k profit/gain
I owner finance the sale with the buyer paying $100k down @ 5% interest over 10 years
For personal federal income tax purposes:
- Do I still have to pay the full capital gain on $100K in the tax year I sold it?
- OR can I defer the gains to when I receive the monthly payments over 10 years?
- If I can defer it, how do I report the gains vs income on the loan?
Overall, does this scheme make any sense to do, or am I missing something?