Decisions that are hard to undo
How title is held, whether in your own name or through a partnership or corporation, shapes how income, losses, and an eventual sale are taxed, and moving property between entities later can itself trigger tax or transfer costs. Depreciation reduces taxable income while you hold a rental property, but much of that benefit generally comes back into play when you sell. Federal depreciation rules have changed in recent legislation, so assumptions from a few years ago may not hold. Property held as a residence, held for investment, and held for resale by someone who develops or flips are taxed differently, and the label you choose does not settle which one applies.
Selling without an immediate tax bill
A like-kind exchange can defer gain when investment or business real estate is sold and replaced with other qualifying real estate. The rules are mechanical, with strict windows for identifying and acquiring the replacement property and a requirement that sale proceeds not pass through your hands, so the exchange has to be set up before the first sale closes. Installment sales can spread gain over the years in which payments arrive, with tradeoffs of their own. For your own home, a separate exclusion may shelter part of the gain if the ownership and use tests are met.
New York costs that sit alongside income tax
New York State and New York City impose transfer taxes on many sales, and some transfers of interests in entities that own real property are taxed as well. Sellers who are not New York residents generally must make an estimated income tax payment at closing. Property tax assessments, and any exemptions or abatements that may apply, can matter as much over time as the income tax. Bring the deeds, past closing statements, depreciation schedules from prior returns, and any entity documents for the property. We map your plans for the coming years and identify which decisions have to be made now rather than at the next closing.
