Reducing capital gains tax on property involves utilizing primary residence exclusions ($250k single/$500k married), performing a 1031 exchange for investment properties, increasing the cost basis through capital improvements, and offsetting gains with capital losses. Holding property for over one year qualifies for lower long-term capital gains tax rates.
Harvest your tax losses
If you have other investments, you can use any losses to help cancel out the capital gains tax from selling your rental property. This strategy is known as tax-loss harvesting, and under it, you can sell underperforming assets to offset your capital gains.
The "6-year rule" for Capital Gains Tax (CGT) in Australia allows you to treat a former main residence as tax-exempt for up to six years after you move out, even if you rent it out, enabling you to avoid CGT on any growth during that period. You qualify by moving out, choosing to treat it as your main home for tax, and can reset the rule by moving back in. If you rent it out for longer than six years, only the portion of the gain after the six-year mark becomes taxable.
The seller must not have sold a home in the last two years and claimed the capital gains tax exclusion. If the capital gains don't exceed the exclusion threshold ($250,000 for single people and $500,000 for married people filing jointly), the seller doesn't owe taxes on the sale of their house.
The 20% rule for capital gains refers to the highest federal tax rate for long-term capital gains, applying to higher income brackets when you sell investments (stocks, real estate) held for over a year, with lower rates of 0% and 15% for lower incomes, and even higher rates for special assets like collectibles. This rate kicks in for single filers earning over approximately $492,300 (2024) or $533,401 (2025), and higher for joint filers, making holding assets over a year a key tax strategy.
On a $100,000 capital gain, you'll likely pay 15% for long-term gains, resulting in about $15,000 in federal tax (plus potential state tax), but it could be 0% or 20% depending on your total taxable income and filing status, while short-term gains are taxed as ordinary income (potentially 22-24%).
Your $500,000 can give you about $20,000 each year using the 4% rule, and it could last over 30 years. The Bureau of Labor Statistics shows retirees spend around $54,000 yearly. Smart investments can make your savings last longer.
To qualify for 0% capital gains tax, you must have long-term capital gains (assets held over a year) and your taxable income (after deductions) must fall below specific IRS thresholds, which change annually but are roughly <$48,350 for single filers and <$96,700 for married filing jointly for the 2025 tax year, allowing for higher total income when combined with deductions like the standard deduction. The key is keeping your adjusted gross income (AGI) low enough so that after subtracting deductions, your taxable income remains within these limits.
One of the simplest yet most expensive mistakes is misunderstanding the difference between short-term and long-term capital gains taxes. Short-term gains — profits from assets held less than a year — are subject to typical income tax rates, which can reach 37% for high earners.
The capital gains tax over 65 is a tax that applies to taxable capital gains realized by individuals over the age of 65. The tax rate starts at 0% for long-term capital gains on assets held for more than one year and 15% for short-term capital gains on assets held for less than one year.
For the tax year 2025/2026, these are the rates of CGT. For basic rate taxpayers it's 18% on gains from residential property and on gains for other chargeable assets. For higher and additional rate taxpayers, it's 24% on gains from residential property and on gains from other chargeable assets.
The beneficiary claiming the discount must be an Australian resident for tax purposes. The trust must have held the asset for at least 12 months before the CGT event occurs.
The primary "one-time" capital gains exemption in the U.S. allows single filers to exclude up to $250,000 (or $500,000 for married couples filing jointly) of profit from selling their main home, provided they've owned and lived in it for at least two of the last five years before the sale. While it's often called a one-time exclusion, you can use it multiple times, but you must wait two years before claiming it again on another property.
Capital improvements: Improvements that add value to your home or prolong its useful life can reduce the amount of capital gains tax you owe when you sell your home, but won't be immediately deductible.
A common way to defer or reduce your capital gains taxes is to use tax-advantaged accounts. Retirement accounts such as 401(k) plans, and individual retirement accounts offer tax-deferred investment. You don't pay income or capital gains taxes on assets while they remain in the account.
On a $100,000 capital gain, you'll likely pay 15% for long-term gains, resulting in about $15,000 in federal tax (plus potential state tax), but it could be 0% or 20% depending on your total taxable income and filing status, while short-term gains are taxed as ordinary income (potentially 22-24%).
Capital gains tax rates remain unchanged under the One Big Beautiful Bill Act. However, Project 2025, a policy blueprint developed by the Heritage Foundation, outlined several potential changes to capital gains taxation, including: Reducing the top long-term capital gains rate to 15%, from the current 20%
4 Strategies to Reduce or Lower Capital Gains Tax on Rental Properties
The "6-year rule" for Capital Gains Tax (CGT) in Australia allows you to treat a former main residence as tax-exempt for up to six years after you move out, even if you rent it out, enabling you to avoid CGT on any growth during that period. You qualify by moving out, choosing to treat it as your main home for tax, and can reset the rule by moving back in. If you rent it out for longer than six years, only the portion of the gain after the six-year mark becomes taxable.
Roughly 7% to 9% of American households have $500,000 or more in retirement savings, though figures vary slightly by source, with data from late 2025 suggesting around 7.2% and older 2022 data indicating about 9%, showing it's a significant milestone achieved by less than one in ten families, despite higher averages driven by wealthy individuals.