Closed on rental property sale Dec 31, 2024, got funds Jan 2, 2025 - which year do I pay capital gains tax?

But what if the title company or bank made a mistake and delayed the transfer? Would that make any difference? Could OP argue the sale wasn't "complete" until funds were received?

The title transfer and signed final paperwork is what establishes the date of sale, regardless of when the money changes hands. Banking delays don't change the legal completion date of the transaction. Even if there was a processing error, the IRS would still consider the transaction complete on the closing date when all parties signed the paperwork and the title legally transferred. You could potentially try to argue otherwise, but you would need substantial documentation showing the closing wasn't actually finalized on December 31st, not just that the money was delayed.

Does it work for sales where you've done a 1031 exchange previously? My situation is complicated because I did a 1031 exchange when buying the property I'm now selling.

Sounds interesting but how accurate is it really? No offense but I've tried "AI" tax tools before and they missed some big things. Is this different?

Yes, it absolutely handles 1031 exchanges! It actually has specific features for tracking basis across exchanges and making sure you're calculating the adjusted basis correctly when you finally sell the replacement property. It'll show you exactly how much of your gain is attributable to the previous property. Regarding accuracy, I was skeptical too for the same reasons. The difference is this tool was built specifically for real estate transactions and capital gains calculations, not general tax preparation. It's not trying to do everything - it's deeply specialized in real estate tax issues, which is why it caught things my accountant missed. Plus, you can share the results directly with your CPA who can verify everything.

How does that even work? I thought the IRS phone system was notorious for disconnecting people and having ridiculous wait times. Does this service actually get you better placement in the queue somehow?

Sorry but this sounds like BS. No way the IRS gives a third party company special access to their phone lines. Sounds like a scam to me.

It doesn't give you a better place in line - it just waits in the queue for you. Basically, it dials into the IRS and navigates the phone tree, then stays on hold so you don't have to. When it detects that a representative is about to pick up, it calls your phone and connects you directly to the IRS agent. You don't waste hours listening to hold music. I understand the skepticism - I felt the same way! It's not giving special access though. It's just automating the hold process so you don't have to sit there. The IRS never disconnects the call because the service stays connected the entire time. It's similar to customer service callback features some companies offer, except this works with agencies that don't offer callbacks.

I hadn't thought about tax loss harvesting - that's a good idea. I do have some stocks that have performed poorly this year that I could potentially sell. How much of a capital loss can offset capital gains? Is there a limit?

Capital losses can offset capital gains dollar-for-dollar with no limit. So if you have $30,000 in capital gains and realize $30,000 in capital losses, they would completely offset each other. If your losses exceed your gains, you can use up to $3,000 of remaining losses to offset other income types (like wages), and then carry forward any additional unused losses to future tax years. This is especially valuable in your situation since you're trying to avoid jumping into a higher tax bracket.

This is a really good point. The 1099-S is what the IRS will use to match against your tax return. The date on that form is what matters most because that's what the IRS computer system will be looking for when processing returns.

I've heard about Opportunity Zones but don't know much about them. How exactly would that help in my situation? Would it just defer the gains or actually reduce them? And are there specific types of investments I'd need to make?

Investing in a Qualified Opportunity Zone would defer your capital gains until 2026 (or whenever you sell the QOZ investment if earlier). If you hold the QOZ investment for at least 10 years, any appreciation on the new investment becomes completely tax-free. You would need to invest through a Qualified Opportunity Fund that puts money into businesses or properties in designated opportunity zones. It doesn't eliminate your original capital gains tax, but it pushes it off several years and gives you tax-free growth on the new investment. This could help solve your immediate tax bracket problem by moving those gains to a future tax year.