Tax Strategies for Real Estate Investors: Maximize Your Returns

Often you don't. If the home was your primary residence for at least two of the last five years, IRS Publication 523 lets most single filers exclude up to $250,000 of gain and most married couples filing jointly up to $500,000. Gain above the exclusion, or on a property that wasn't your primary residence, is generally taxable. Confirm your specific situation with a tax professional.

No. The IRS treats a direct cash sale exactly like a financed sale — what matters is your cost basis, the sale price, and how long you owned and lived in the property. The difference is timing: a cash close can land the proceeds (and therefore the taxable event) in a specific tax year, which is worth planning around if you're near a year-end boundary.

Keep the closing disclosure, the original purchase settlement statement, and receipts for capital improvements — new roof, addition, HVAC replacement. Improvements raise your cost basis and reduce taxable gain, while routine repairs generally don't. Most tax advisors suggest holding these records for at least three years after you file the return covering the sale.

It depends on your state and how the property was titled. Property held in a living trust or passing through a transfer-on-death deed can often be sold right away, while property that must pass through probate usually needs the court to confirm the executor's authority first. Some states also allow a sale during probate with court approval, so ask the estate attorney which path applies.