Taxes

How to Avoid Capital Gains Tax on a Land Sale

By
Dominion
Updated:
December 12, 2024
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4 min read

Selling a huge piece of property might set off a profit tsunami. But for businesses and high-net-worth people facing a sizable capital gains tax bill, the thrill of a good sale may quickly fade. Given these taxes quickly devour a good portion of your income, you will have far less than you had anticipated.

Thankfully, Dominion is here to assist. Unlike other tax consultants, we are not your typical team. Our unique approach to wealth management comes from our full grasp of international asset protection and tax laws.

Our area of expertise is guiding customers like you through every facet of capital gains tax using a variety of specialist tools and techniques most advisors aren’t aware of.

The capital gains tax on your land sale might be greatly lowered or perhaps eliminated with appropriate preparation and direction. This is not about breaking the rules or running unneeded risks. It’s a matter of safeguarding your capital and optimizing your profits by applying tested legal techniques.

What Is Capital Gains Tax on Land Sales?

Let us now define “capital gains” more precisely. Basically, it’s the profit you make by selling anything for more than you paid for it. About land, this may be a large sum, especially if you have owned the property for a long time or made additions that increased its value.

The hitch is the government wants a portion of that earnings. Capital gains tax then relates here. Your due payment will depend on several factors. Using your original purchase price as your “tax basis,” you first determine the final sale price.

Your capital gain comes from this. This gain is subsequently subjected to the tax rate. The tax rate is not a statistic with universal application. Your length of land ownership and income level will decide it.

Should you have possessed the land for more than a year, it is considered a long-term gain and often taxed at a lesser rate than short-term gains (property owned for less than a year).

Particularly targeted for vulnerable land sales are high capital gains taxes. Unlike primary homes, which might offer tax benefits, land transactions are not as protected. 

This could expose your profits to the whole force of the capital gains tax, thereby possibly eradicating a significant amount of them. Moreover, the value of land can change dramatically with time, which would lead to even greater tax payments upon sale.

The Limitations of Traditional Tax Mitigation Strategies

You have most likely heard of numerous common techniques people take to reduce their capital gains taxes. Let’s get started by looking at some reasons these strategies might not be the perfect fit for a land sale.

First, there is the main dwelling exemption. This lets you deduct a specific amount of profit from your taxes when selling your primary residence. This exemption does not apply, nevertheless, to land not primarily used for housing. This approach won’t help, then, if you are selling investment property or unoccupied land.

A 1031 exchange is another really popular strategy. If you reinvest the profits from your land sale into another like-minded property, you can postpone paying capital gains tax. 

Although this can be a helpful instrument, it has strict rules and deadlines. Particularly for unique or specialized land, locating a suitable replacement property within the necessary period might be difficult. A 1031 exchange also merely postpones rather than eliminates taxes. When you sell the new house, you will ultimately have to pay the tax.

Other credits and deductions available to help lower your tax load include those for certain sale-related expenditures or for the cost of upgrades.

These deductions, meanwhile, may have restrictions and might not significantly affect a sizable capital gain. If your land has appreciated greatly, these conventional approaches might not provide sufficient relief.

Unlock a World of Possibilities with Dominion

At Dominion, we go beyond conventional tax plans. Using the authority of international trust structures helps us to create a world of possibilities. We can greatly lower your tax exposure by arranging your assets in offshore trusts with strategic intent.

Operating under other legal frameworks, these trusts sometimes have more advantageous tax regulations than in your home nation.

Where your trust resides counts. We carefully choose countries like the Cook Islands or Nevis, well-known for their tax benefits and rigorous asset protection rules. These countries provide a degree of protection and privacy that might be quite helpful in protecting your wealth.

Another rather useful weapon in our inventory is private placement life insurance (PPLI). Combining the advantages of life insurance with a flexible investing platform, this unusual financial solution provides even more benefits.

Through policy loans, you may enjoy tax-free growth and access to your assets while perhaps postponing or even avoiding capital gains tax by arranging your property sale profits within a PPLI.

For several clients, we have successfully employed these techniques. Using an offshore trust in the Cook Islands and a PPLI in Bermuda, we helped a US client save approximately $48 million in taxes on a $240 million land deal. In another instance, using offshore trusts and tax-free insurance arrangements, we saved over $24 million in capital gains tax for a UK entrepreneur on a £120 million business sale.

These are only two of the ways Dominion’s creative strategy may drastically lower your tax liability. We use our knowledge of foreign tax rules to provide customized solutions that safeguard your assets and maximize your wealth. This is the kind of expertise you can expect when you entrust your financial future to the pros at Dominion.

Additional Benefits of Working with Dominion

Dominion’s knowledge goes well beyond reducing your land sale taxes. We approach wealth management holistically in a way that your financial plans complement your general objectives. We take long-term effects for your wealth and legacy into account in addition to the current transaction.

Tax rules and regulations are always changing. We therefore keep a close eye on these developments to make sure your plans stay compliant and effective.

Using our thorough understanding of both domestic and international laws, we spot possibilities and help to reduce dangers that others might overlook.

The experience of our staff is truly remarkable. Many of our members come from backgrounds in financial industries and government organizations most people cannot access.

This helps us to grasp the complex mechanisms of the system and project future developments. Working with Dominion provides access to a knowledge and expertise network that will improve your whole financial plan, not merely tax guidance.

Secure Your Legacy with Dominion

While selling land might be a successful venture, the shadow of capital gains tax could drastically lower your income. Dominion offers another path, even if traditional tax plans might occasionally offer enough help.

By use of foreign trust structures, clever asset placement, and unique ideas like PPLI, we can help you negotiate the complex nature of property sale taxes and maybe reduce or even eliminate your tax load.

Let our knowledgeable staff handle your assets so that your legacy will remain strong for years to come. Contact Dominion for tailored recommendations and find out how we can safeguard your money and improve your returns.

Dominion

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