To avoid or reduce capital gains tax on real estate, consider the following strategies:

• Primary Residence Exclusion: If the property is your principal residence and you have lived in it for at least two of the last five years, you can exclude up to $250,000 of capital gains if single, or $500,000 if married filing jointly, from taxation

• 1031 Exchange: For investment or rental properties, you can defer capital gains tax by reinvesting the proceeds into a like-kind property within 180 days through a 1031 exchange. This defers, but does not eliminate, the tax liability

• Convert Rental to Primary Residence: If you convert an investment property to your primary residence and live in it for at least two years out of the last five, you may qualify for the primary residence exclusion on some or all of the gain. For properties acquired via 1031 exchange, you must own for five years and live in it for at least 24 months within that period

• Offset Gains with Losses: Use capital losses from other investments to offset capital gains on the sale of real estate

• Increase Cost Basis: Keep records of home improvements and add these costs to your property's basis, reducing taxable gain

• Use Retirement Accounts: Buying and selling real estate through self-directed IRAs or 401(k)s can defer or eliminate capital gains taxes, but this requires specialized custodians and adherence to IRS rules

• Charitable Remainder Trust (CRT): You can gift your property to a CRT before sale, avoiding capital gains tax and receiving income over time, but this involves irrevocable trust rules and restrictions

• Timing the Sale: Plan the sale to coincide with other capital losses or events that may reduce taxable gains

Each of these strategies has specific requirements and limitations, so consulting a tax professional or CPA is recommended before proceeding

. In summary, the most common and accessible method for homeowners is the primary residence exclusion, while investors often use 1031 exchanges or convert properties to primary residences to reduce or defer capital gains taxes