Minneapolis Duplex, Triplex or Fourplex Sellers: How Closing Dates Affect Your Taxes

Whether you’re currently selling a Twin Cities duplex, triplex or fourplex, or are wondering if you can still pull it off, you may want to consider the tax ramifications of selling in 2026 or closing early next year.

The answer may lie in whether your income will be higher this year than next, how much depreciation you’ve taken, and what you plan to do with the money.

For example, if you close on December 29, the gain goes on your 2026 return. Close on January 5 and it moves to 2027, pushing most of the tax out about a year. If 2027 will be a lower-income year, January usually wins. If it’ll be a bigger year, you may want to close at the end of December.

Long-term gains are taxed federally at 0%, 15%, or 20%. For 2026, married couples filing jointly pay 0% on taxable income up to $98,900 and 15% up to $613,700. Higher earners may owe an extra 3.8% net investment income tax. The gain itself can push you up a bracket, and Minnesota taxes it as ordinary income.

Depreciation lowered your taxes while you owned the property. When you sell, that portion of your gain is taxed at up to 25% federally, and you owe it on the depreciation you were allowed to take, whether you claimed it or not. A duplex bought 10 years ago with a $240,000 building has roughly $87,000 of depreciation, which could mean up to $21,800 in recapture tax. Get your number from your CPA before you sign a purchase agreement.

If you’re considering a 1031 exchange to avoid paying taxes, remember you have 45 days from the closing date to identify the replacement property. You must close on that replacement property no later than 180 days after the sale of the relinquished property.

For owner-occupants, the good news is they can exclude up to $250,000 of gain ($500,000 for married couples) on the unit they lived in. Depreciation on the rented units is still recaptured.

Selling the property on a contract for deed spreads the capital gain over several years, but recapture is due in the year of sale. Be sure to dig up your receipts for improvements and selling costs now. They reduce your gain.

And if you choose to close and cash out early next year, you may want to strategize with your tax advisor for ways to offset your 2027 tax obligation.

A few weeks on either side of New Year’s can shift your tax bill a year, change your bracket, or unlock years of parked losses. Run the numbers with your CPA, then pick your date.