What to Do With the Tax Bill After Selling Real Estate? Try These 5 Tax Deferral Strategies
What to Do With the Tax Bill: Smart Tax Deferral Strategies After a Real Estate Sale
It happens more than you'd think.
You sell an investment property for $2.1 million. Between the original purchase price, depreciation, and improvements, you net $800,000 in gains. But then April hits… and your CPA gives you a capital gains tax bill approaching $300,000 to $400,000.
Welcome to the world of post-sale tax shock.
But here’s the good news: there are proven tax deferral strategies that can help you preserve more of your sale proceeds — if you plan ahead.
What Are Tax Deferral Strategies?
Tax deferral strategies allow you to delay paying taxes on capital gains by reinvesting the proceeds of a sale into qualified investments or vehicles. Some, like 1031 exchanges, defer the gain entirely; others, like Charitable Remainder Trusts (CRTs), can eliminate taxes altogether.
The key difference is:
Deferral = You owe the tax later.
Elimination = You may never owe the tax at all.
The 5 Most Effective Strategies in 2025
1. 1031 Exchange
The gold standard for real estate investors. A 1031 exchange allows you to defer capital gains taxes by reinvesting proceeds into another "like-kind" property.
✅ Pros:
Total tax deferral if done correctly
Great for growing a real estate portfolio
⚠️ Cons:
Must identify new property within 45 days
Must close within 180 days
Complex rules — easily disqualified
2. Delaware Statutory Trust (DST)
DSTs are fractional ownership structures that qualify under 1031 rules but remove the need to be a landlord. You invest passively in institutional-grade real estate.
✅ Pros:
Qualifies for 1031
No toilets, tenants, or trash
Diversified and managed professionally
⚠️ Cons:
Illiquid — long hold periods
Limited control over the asset
3. Qualified Opportunity Zones (QOZs)
Invest capital gains into a QOZ fund within 180 days and defer taxes until 2027. Hold the investment for 10 years, and you can eliminate gains on the new investment.
✅ Pros:
Partial deferral and full elimination
Attractive for long-term investors
⚠️ Cons:
Must invest within 180 days of sale
Geographic and fund restrictions
Riskier due to development timelines
4. Structured Installment Sales
Negotiate with the buyer to receive proceeds over time. You report the gain as you receive payments, spreading out the tax impact.
✅ Pros:
Smooths out taxable income
Creates consistent cash flow
⚠️ Cons:
Requires buyer cooperation
Default risk on future payments
5. Charitable Remainder Trust (CRT)
Place the property or sale proceeds into a CRT, receive income for life, and get a charitable deduction. The trust sells the asset tax-free.
✅ Pros:
No immediate capital gains
Lifetime income stream
Charitable legacy and tax deduction
⚠️ Cons:
The asset goes to charity at death
Legal/administrative complexity
Which Strategy Is Right for You?
Here’s a quick comparison:
| Strategy | Ideal For | Liquidity | Complexity | Primary Risk |
|---|---|---|---|---|
| 1031 Exchange | Active investors | Low | High | Replacement timeline pressure |
| DST | Aging landlords / passive investors | Very Low | High | Illiquidity + limited control |
| Opportunity Zones | Long-term, risk-tolerant investors | Low | Medium | Location and timing risks |
| Structured Installment Sale | Flexible deals / cooperative buyers | Medium | Low | Buyer default on future payments |
| CRT (Charitable Trust) | Charitably inclined individuals | Medium | High | Irrevocable gift; setup complexity |
Why Timing and Liquidity Matter
Many tax deferral strategies require planning before the sale closes — miss that window, and your options shrink dramatically.
Others, like DSTs or CRTs, can tie up your funds for years. So while you’re deferring taxes, you may also be sacrificing flexibility and income.
At Legacy Exits, we help you balance:
Tax efficiency
Cash flow
Estate objectives
How Legacy Exits Helps
We’re not just tax strategists. We’re exit planners.
Whether you’re selling a rental portfolio, offloading commercial property, or retiring from being a landlord, we:
Model multiple deferral scenarios side-by-side
Coordinate your CPA, legal team, and investment strategy
Help you preserve wealth and your sleep
One client sold $5.7M of real estate. Using a combination of DSTs and a CRT, they deferred over $1.2M in taxes and generated $8,000/month in predictable income.
Final Thought: Deferral Is a Strategy, Not a Shortcut
Deferring taxes isn’t about dodging the IRS. It’s about strategically managing your exit so that taxes aren’t your largest expense.
Thinking of selling a property? Don’t wait until it’s too late.
Start your Tax Deferral Strategy Session with Legacy Exits and map out your best next move.