I know I can use the profits from the sale of a rental property to by another property without paying capital gains tax. But can I use the profits from the sale of one rental property and apply it to an existing mortgage on another rental property I own without having to pay capital gains tax? Thanks
You’re correct you may be able to do a type of 1031 exchange when you sell one investment property and purchase another like kind property. Keep in mind, there are strict IRS guidelines and deadlines to adhere to, so we recommend consulting with a 1031 expert. Here’s a link to our guide on 1031 exchanges https://fitsmallbusiness.com/1031-exchange-like-kind/
In regards to your question, generally you can’t avoid capital gains by paying off the mortgage on another property, but for specific tax related questions, we recommend you consult with a tax professional. Feel free to check out our site for more upcoming 1031 exchange content.
All the best,
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