This is the tax you owe on the profit when you sell a property for more than your adjusted basis. For most long-term real estate investors, capital gains are taxed at favorable rates—typically 15% or 20%, depending on income. But this tax can still take a significant bite out of your profits. That’s why many investors use a 1031 exchange to defer capital gains and reinvest the full proceeds into a new property. It’s not a loophole—it’s a strategy built into the tax code to encourage reinvestment and economic growth.
