A DST can eliminate all taxes when you sell your investment property.

If you want to retire your landlord duties and sell your investment property, taxes will be owed. A Delaware statutory trust could eliminate this tax problem. A Delaware statutory trust gives you some of the same tax benefits as directly owning an investment property without any management responsibility. You will no longer have to worry about breaking pipes or evicting tenants. At the same time,  you can collect tax-advantaged income from the pool of real estate investments you choose.

A DST uses the 1031 exchange process to eliminate taxes.

You might be familiar with the IRS 1031 exchange. If you follow the rules of the 1031 exchange process when you sell your rental property, you can avoid taxes when buying a new one. Most individuals we talk to don’t know they can do a 1031 exchange into a passive real estate fund, where they become solely investors and completely retire all their landlord duties. Taxes can be eliminated, and risk can even be mitigated since you may collect rental income from 1,000s of tenants instead of just one.

A Delaware Statutory Trust can protect you from significant tax damage.

As a landlord looking to sell your investment property, the threat of taxes can be debilitating. You are subject to federal and state income taxes when you sell. The federal depreciation recapture tax is 25% as of 2024. Your sale will likely bump you into a higher tax bracket due to the significant realization of capital gains. The realization may even increase your capital gains rate from 15% to 20% with an added 3.8% Medicare sure tax on a federal level. On a state level, a significant gain often moves you into a higher state tax bracket, so after all taxes are included, up to 1/3rd of your sale proceeds may disappear to income taxes. 

The official definition of Delaware Statutory Trust

A Delaware Statutory Trust is a legal entity created under Delaware law designed to hold title to real estate and other assets. DSTs are particularly useful for investors seeking to defer capital gains taxes through the 1031 exchange process. A Delaware Statutory Trust is qualified as “like-kind property,” which, if used successfully, can allow you to complete a successful 1031 exchange.

In this kind of trust, the ownership is divided into units that many individual investors own. When you purchase units in a DST, you will have a fractional interest in professionally managed institutional quality real estate. The kind of real estate and geography is up to you; your main limitation is that you no longer actively manage the property, and you are locked into the investment for anywhere from 3 -to 20 years, depending on the type of DST you purchase. 

Learn more

What is a 1031 Exchange, and how can I protect myself from the high 1031 Exchange failure rate Read our blog>>

When do I pay the delayed tax bill? Is there a way to never pay the taxes? You may never have to pay taxes.  Read the benefits blog>>

How can I get my money out and avoid taxes?  Read the benefits blog>>

Do I qualify to purchase a DST? You must be an accredited investor with $1 million or more in net worth outside your primary home or substantial income. See our disclosures for additional information, or Contact us>> to see if you qualify.

What are my risks? Read our disadvantages blog>>

What are all the benefits of a DST? Is it true my new rental income can become mostly tax-free again? Yes,  Read our benefits blog>>

Please message us today>>   to learn more about how we can help you achieve your financial goals.