At Johnston Pacific Commercial Real Estate, Inc., we know that selling industrial property is more than a transaction, it’s a major financial milestone. And while a sale can unlock significant equity, it can also trigger a heavy tax bill if not carefully planned. Our goal is to help clients not only maximize their sale price but also preserve as much of their proceeds as possible so they can reinvest and grow.
Whether you’re retiring, relocating capital, or restructuring your portfolio, here are the most effective steps you can take to reduce your tax liability and keep more of your money working for you.
- Get a Clear Picture of Your Tax Exposure Early
One of the biggest mistakes sellers make is waiting until after a deal closes to think about taxes. At Johnston Pacific, we encourage clients to start tax planning as early as possible.
Here’s what typically applies to industrial real estate sales:
- Federal Capital Gains Tax (15–20%)
- Depreciation Recapture Tax (25%)
- California State Taxes (up to 13.3%)
- Net Investment Income Tax (NIIT) (3.8%)
The combined hit can exceed 35% of your gain. That’s why we coordinate early with your CPA and legal advisors to assess your cost basis, past depreciation, and estimated tax exposure, so you can make proactive, not reactive, decisions.
- Defer Taxes with a 1031 Exchange
One of the most effective tools in a seller’s tax strategy is the 1031 Exchange, a mechanism that lets you defer capital gains and depreciation recapture by reinvesting in another qualifying property.
If you’re planning to stay in the real estate game, this is one of the smartest moves you can make.
Benefits include:
- Complete tax deferral
- Greater purchasing power for the next investment
- Portfolio growth and diversification
Johnston Pacific regularly helps clients’ structure seamless 1031 exchanges. We assist with timelines, recommend experienced qualified intermediaries, and help you source ideal replacement properties, often off-market or exclusive to our network.
Remember: You must identify a replacement within 45 days and close within 180 days. Precision and timing are everything.
- Explore Delaware Statutory Trusts (DSTs)
If you’re ready to exit day-to-day management responsibilities but still want passive income and tax deferral, Delaware Statutory Trusts (DSTs) can be a compelling 1031 option.
DSTs allow you to invest in institutional-quality assets, such as Class A logistics centers or mission-critical facilities, without direct ownership or landlord duties. You still get:
- Monthly income distributions
- Tax deferral through 1031 eligibility
- Professional property management
At Johnston Pacific, we maintain relationships with reputable DST sponsors and can help guide you through suitability, timing, and investment structure.
- Consider Opportunity Zones for Long-Term Tax Advantages
For certain sellers, investing capital gains into a Qualified Opportunity Fund (QOF) can unlock longer-term tax benefits:
- Tax deferral on your original gain until 2026
- Tax-free appreciation for new investments held 10+ years
While not every sale qualifies, this can be an advantageous strategy if you’re open to longer holding periods and want to reduce future taxes entirely. We can connect you with vetted fund sponsors and help assess the fit for your goals.
- Think About Installment Sales
If you’re working with a qualified buyer and don’t need all the cash up front, a structured installment sale can spread your capital gains over multiple tax years, keeping you in a lower bracket and minimizing total taxes.
You’ll earn interest on the deferred portion and may avoid the additional 3.8% NIIT. Johnston Pacific can help evaluate buyer creditworthiness and structure secure, seller-friendly terms.
- Offset Gains with Losses or Charitable Strategies
If you have investment losses elsewhere or are charitably inclined, there are creative ways to reduce your tax bill:
- Harvest investment losses to offset gains
- Donate part of the appreciated property to a charitable remainder trust (CRT) for an upfront deduction and ongoing income
Our advisory team can work alongside your tax planner to explore these alternatives and integrate them into your broader exit strategy.
The Johnston Pacific Advantage
At Johnston Pacific Commercial Real Estate, Inc., we’ve guided industrial property owners through hundreds of sales, always with a clear focus on maximizing both value and after-tax proceeds.
Our deep experience in South Orange County’s industrial market, combined with our strategic tax knowledge and collaborative approach with financial professionals, gives clients an edge that goes far beyond the closing table.
Thinking about selling your industrial property?
Let’s start with a conversation about value, timing, and strategy. Contact the Johnston Pacific team today, we’ll help you keep more of what you’ve earned and make your next move with confidence.
