Your Strategic Partner in Buying and Selling Self Storage Investments

Deciding to sell a self-storage property can be a daunting task, particularly when considering the potential tax implications. Fortunately, you have several options to minimize these costs.

When selling self-storage property, the tax code provides various planning strategies that can significantly reduce expenses, such as capital gains taxes. Here’s a look at how you can navigate these options effectively.

Property owners may be surprised to find that their tax liability could exceed the current 20% federal capital gains tax rate, in addition to state taxes. “Understanding the full range of options and tax implications available when selling a self-storage property is crucial,” Jones explained. “A 1031 exchange is not always the best solution for addressing tax issues.”

For example, a California property owner with a $5 million property and a taxable gain of $3.5 million would face $1.07 million in capital gains taxes.

If they opted for a traditional sale, they would end up with $2.1 million after paying off debt and taxes. However, by strategically using the tax code, the owner could eliminate these taxes entirely and receive $2.93 million tax-free for reinvestment.

This result was achieved by combining two established tax planning strategies. This approach allowed the seller to lawfully reduce the taxable capital gain from 100% to just 1%, while enjoying additional tax savings, maintaining full control over the sale proceeds, and protecting these assets from creditors and estate taxes. Notably, this is the same strategy Mark Zuckerberg employed for his Facebook stock before its public offering.

It’s important to recognize that these tax laws, crafted by Congress, are available to everyone when applied correctly, not just billionaires.