March 16, 2022
Just when California rental property owners were hoping for a post-COVID return to normalcy, Assemblyman Chris Ward, D-San Diego, has introduced California Assembly Bill 1771 (AB 1771) which would impose a hefty 25% tax on the capital gain produced by selling a residential rental property within three years of buying it. The tax rate would then decline by 5 percentage points each year until reaching zero after seven years.
Apartments with at least 15% of units that are considered affordable would be exempt.
Taxes collected under AB 1771 would fund a newly created “Speculation Recapture Community Reinvestment Fund” and be disbursed by politicians’ fund to local governments for schools, affordable housing, infrastructure, and transportation.
As written, the bill does not grant any exceptions to investors who buy a property, make improvements, and then sell it.
Several open issues remain which we are closely tracking including Implications for 1031 exchanges to avoid the added tax burdens.
We will publish further updates as they become available.
Next Steps
Our team at First Guardian Group is pleased to help California investors evaluate out-of-state investment options with in-place property management that have the potential to provide both ongoing cash flow and potential appreciation.
Please contact us toll free at 866 398-1031 or send us an email at info@FGG1031.com for more information. You an also schedule a meeting on my calendar here.
Help Save 1031 Exchanges
1 Depreciation deductions for residential properties can be more favorable than for commercial properties due to differences in allowed depreciation schedules. Investors who are comparing residential commercial investments should consider after tax cash flows.
Your Comments :