If you’re thinking about selling a piece of real estate or a closely held business, it’s natural to focus on the headline number: the sale price.
But there’s another number that often matters more:
How much of the proceeds will you actually keep after taxes—and how soon will you owe them?
For many sellers, the tax bill is larger (and arrives faster) than expected. The good news is that, with the right planning before you sign on the dotted line, you may have options to manage the timing of taxes and create a more intentional transition from a concentrated asset to a diversified plan.
The common surprise: taxes often hit all at once
When you sell a highly appreciated asset—such as investment real estate, commercial property, or a privately held company—several layers of taxes may apply, depending on your situation:
- Federal capital gains taxes
- State income taxes (which can be significant in some states)
- Depreciation recapture for certain real estate transactions
- The Net Investment Income Tax (NIIT) (the Medicare surtax), if applicable
The result is that a sale that feels like a major win can quickly turn into a “wait, how much do I owe?” moment.
A simplified example of the math
Consider a hypothetical scenario:
- Property value (or sale price): $5,000,000
- Approximate cost basis: $500,000
- Estimated gain: $4,500,000
In a taxable sale, the combined federal and state tax impact (plus potential surtaxes) can be substantial. In some real-world situations, sellers may see tax costs that approach seven figures.
This isn’t meant to predict anyone’s outcome—every sale is unique—but it illustrates the core issue: planning for a liquidity event is not just about selling well; it’s about selling wisely.
The “default path” and its hidden cost
Most people follow a straightforward sequence:
- Sell the asset
- Pay the taxes
- Invest what’s left
The challenge is that taxes can shrink the amount you have available to reinvest from day one. Even if your long-term goals are achievable, you may have to take more investment risk, save longer, or adjust your spending plan simply because the investable proceeds are lower than you anticipated.
That’s why many sellers explore strategies that focus on tax timing, income planning, and diversification—especially if the sale represents a once-in-a-lifetime event.
A strategy some sellers consider: an Installment Sale Trust (IST)
One approach that often comes up in planning conversations is an Installment Sale Trust (IST).
At a high level, the concept is designed to create an installment-style receipt of proceeds rather than recognizing the entire gain immediately in a single year.
How it generally works (high level)
While details vary and proper structuring is essential, the concept is often explained like this:
- You transfer/sell the asset to a trust structure
- The trust sells the asset to the ultimate buyer
- You receive payments over time under an installment arrangement
Why sellers pay attention to it
In the right circumstances, an installment approach can:
- Spread recognition of capital gains over multiple years (instead of one large taxable year)
- Create a more predictable income stream aligned with your retirement or lifestyle needs
- Support diversification after selling a concentrated holding
- Potentially allow for investment management of proceeds in a more systematic way
Just as important: these strategies are typically very timing-sensitive. If you’re already deep into negotiations or have effectively committed to a sale structure, your options may narrow.
Timing matters: plan early—or risk losing flexibility
One of the most common mistakes sellers make is waiting until the last minute to address taxes.
In many cases, meaningful planning needs to occur before key deal milestones, such as:
- Signing a letter of intent (LOI)
- Finalizing deal structure and purchase agreement language
- Reaching a point where the sale is considered “substantially certain”
This doesn’t mean you can’t improve outcomes later, but the earlier you coordinate with your advisory team, the more flexibility you typically have.
Who may want to explore this type of planning
Advanced strategies (including, potentially, an IST) may be worth discussing if you:
- Own highly appreciated investment or commercial real estate
- Own a privately held business
- Are concerned about a large, one-year tax bill
- Want to transition from a concentrated asset into a diversified portfolio
- Prefer planned income rather than a lump-sum approach
It’s also important to note that not every asset or transaction is a fit. For example, strategies designed around complex sale structures are often not intended for publicly traded stocks in the same way they may be considered for real estate or closely held business interests.
Important trade-offs to understand
These strategies can be powerful, but they’re not “plug-and-play.” Depending on the structure, considerations can include:
- Irrevocability (in many trust-based approaches)
- Reduced direct control after transferring the asset
- Costs and complexity, including legal and tax coordination
- Dependence on proper execution and ongoing administration
That’s why this is not a do-it-yourself decision—and why it’s essential to review pros, cons, and alternatives with qualified professionals.
A more helpful question than “What can I sell for?”
As you evaluate a sale, the most important question often shifts from:
“What price can I sell for?”
to:
“What structure helps me keep the most—net of taxes—and supports my long-term plan?”
Those answers are not always the same.
Final thought: you may only do this once—so structure matters
Selling a major asset can reshape your financial life. The decisions you make before the sale closes can influence:
- Your after-tax proceeds
- Your retirement income plan
- Your investment strategy and risk exposure
- Your estate and legacy goals
If you’re considering selling real estate, a business, or another highly appreciated asset, it may be worth pausing to evaluate the full range of planning opportunities—well before the transaction becomes final.
At George Wealth Management, we can work alongside you, your CPA, and a qualified trust/legal team to:
- Clarify your after-tax “net” outcome under different scenarios
- Identify planning opportunities that may fit your goals
- Coordinate next steps so your sale structure aligns with your long-term plan
If this is something you’ve been thinking about, you can start here:
Request a confidential conversation
Or, if you’d prefer something more structured:
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Frequently Asked Questions
How much tax do you pay when selling a business?
It depends on how the sale is structured, but many business owners are surprised to learn that taxes can take 20%–40% or more of the proceeds. Capital gains, depreciation recapture, and state taxes all play a role. That’s why planning before the sale is so important.
Can you defer taxes when selling a business or real estate?
In some cases, yes. Certain strategies—like installment-based approaches—may allow you to spread out the tax impact over time. These strategies depend on timing and structure, which is why they typically need to be considered before a sale is finalized.
What is an installment sale and how does it work?
An installment sale allows you to receive payments over time instead of all at once. This can spread out the tax liability and potentially reduce the immediate tax burden. It may also create ongoing income, but it’s not the right fit for every situation.
When should you start tax planning before selling a business?
Ideally, planning should begin at least 1–3 years before a sale. Waiting until a deal is under contract can limit your options and reduce flexibility. The earlier you start, the more control you have over the outcome.
How can I reduce taxes when selling a business or property?
Reducing taxes typically involves a combination of timing, structure, and coordination between your CPA, attorney, and financial advisor. The key is not just finding a strategy—but making sure everything is aligned before the sale happens.
What is the biggest mistake sellers make when it comes to taxes?
The most common mistake is focusing on the sale price instead of what they’ll actually keep. Without proper planning, taxes can significantly reduce the outcome—even on what looks like a successful transaction.
Do I need a team to plan for selling a business?
Most sellers already have a CPA, attorney, and advisor—but they’re often not working together. Coordinating those pieces can help identify opportunities, avoid mistakes, and ensure the sale supports your long-term goals.
Should I talk to someone before deciding to sell?
Yes. Even if you’re just starting to think about it, having a conversation early can help you understand your options and avoid costly surprises later. The goal isn’t to build a full plan right away—it’s to gain clarity on what’s possible.
This article is for educational purposes only and is not tax or legal advice. Strategies referenced may not be appropriate for every situation. Please consult your tax and legal professionals regarding your specific circumstances.