Joining us from the Living808 Lounge, Kay Mukaigawa of Engel and Volkers focusses on Long Term and Short Term Capital gains.  Kay had a good strategy for people who keep only for a short time. 

“Yes, and it involves understanding WHEN you sell your investment property, and how this can affect your tax liability. When you sell any capital asset for more than the original purchase price, the result is a capital gain.  The tax that you pay on the realized gain, or your profit, depends on how long you own the property before selling it. Capital gains taxes are divided into 2 categories:  Short-term & Long-term. Short term capital gains are taxed as ordinary income and are gains you earn if you own an investment for 1 year or less.  Long Term Capital gains are for assets owned for more than 1 year, and the tax rates are 0%, 15% or 20%, based on your income bracket.  Generally, most fall into the 15% bracket. So, perfect example is my friend Randall, who loves to buy, fix, then sell real estate.

Several years ago, we helped him purchase a fixer-upper.  When the renovations were complete, and Randall was ready to sell this property, 7 months had passed since the purchase date.

We had an open house and then we put the property into escrow with a Buyer who was going to take 60 days to close.  Therefore, 9 months would have passed from the time Randall purchased the investment until he sold the renovated property.

Since Randall was going to profit about $100,000 on the sale of his investment, he would have to pay taxes at the same rate as ordinary income, such as wages from a job.  This is because it would be considered a short-term capital gain since he owned the property for less than 1 year.

If we were able to extend the closing date and Randall was able to sell his property AFTER his 1-year anniversary, then the benefit of claiming it as a long-term capital gain would apply.

Randall is single, is employed, and falls in the 32% tax bracket.  A simple calculation of a short-term gain at $100,000 would be $32,000 in taxes.

If he was able to classify this investment as a LONG-term capital gain by holding the investment for longer than 1 year, Randall would be taxed at 15% or pay about $15,000 in taxes.”

For more information call Engel and Volkers at (808) 725-2000 to discuss your specific situation and there is another upcoming seminar.  Visit for times and availability.