Why Wouldn’t I Just Sell the Property, Pay the Taxes, and Move On? The Rule of 72

One of the most common objections we hear is simple: “I’ll just sell, pay the taxes, and move on.” On the surface, it sounds clean. But the reality is that most people underestimate just how big that tax bill really is—and the long-term impact it can have on their wealth.

How big can the tax bill really be?

A lot of landowners assume capital gains tax is just 15%. The truth? Once your gains exceed about $580,000, the federal rate jumps to 20%. On top of that, there’s depreciation recapture—which means the IRS claws back past tax deductions.

And if your income is over $250,000, you’re also subject to the 3.8% Net Investment Income Tax (often called the “Obamacare tax”). Then layer in state income taxes—anywhere from 5% to 13% depending on where you live—and suddenly that “15%” you were expecting is closer to 30%–40% of your sale proceeds.

Why do people regret paying taxes upfront?

We’ve seen it happen countless times. Someone closes on a sale, writes a massive check to the IRS, and only then realizes they could have deferred those taxes. The regret usually turns into frustration—at their CPA, broker, or anyone who didn’t warn them beforehand.

That’s why one of the most important steps we recommend is this: always talk to your CPA before closing. Ask them to prepare a pre-closing tax projection that shows your federal, state, and depreciation recapture liability in black and white.

This eliminates surprises, sets realistic expectations, and positions you to make a clear-eyed decision. More importantly, it protects you from being blindsided by a tax bill you weren’t prepared for.

What does the Rule of 72 have to do with it?

Here’s where most people miss the bigger picture: it’s not just about what you pay in taxes today—it’s about what you lose in future growth.

The Rule of 72 is a simple formula to estimate how long it takes money to double. You divide 72 by your rate of return.

• At 6% annual growth, your money doubles in about 12 years.

• At 8%, it doubles in 9 years.

Now think about it: if you paid $1 million in taxes today, that’s not just $1 million gone. That’s potentially $2 million in 9–12 years, $4 million in 18–24 years, and so on. Paying taxes upfront cuts your compounding engine in half before it even starts.

What’s the smarter alternative?

Instead of handing 30–40% to the IRS, many landowners choose a 1031 exchange into Delaware Statutory Trusts (DSTs). This allows them to:

• Defer capital gains taxes and keep their full equity compounding.

• Generate passive income potential without dealing with tenants, toilets, or maintenance.

• Diversify across multiple institutional-quality properties.

• Simplify estate planning, since DSTs can pass smoothly to heirs.

And all of this starts with the right first step: get that pre-closing tax projection from your CPA so you know exactly what you’re up against before making any decision.

So, should you really “just pay the taxes”?

If you’re done with real estate and don’t care about leaving money on the table, sure—you can sell and pay. But if you care about maximizing wealth, income, and legacy, then it’s worth exploring tax-efficient strategies before making a move.

Because once you pay that tax bill, there’s no getting it back.