Smart Ways to Avoid Capital Gains Tax When Selling Real Estate Capital gains tax can eat into your real estate profits. But with the right legal strategies, you can reduce or even avoid this tax burden entirely. Let’s explore smart methods that real estate owners and investors can use to retain more of their earnings. 1. Primary Residence Exclusion If you’ve lived in your property for at least two of the past five years, you may qualify for the Primary Residence Exclusion . This allows you to exclude up to $250,000 ($500,000 for married couples) of capital gains. For high-value families, pair this with estate structures to manage step-up and probate risks: how wealthy families use trusts . 2. 1031 Exchange A 1031 Exchange lets investors defer capital gains by reinvesting proceeds into a like-kind property on a strict timeline. It’s widely used in commercial real estate and portfolio rebalancing. Plan the replacement asset via a holding layer: of...