The 24-Month Rule: The Big Capital Gains Exemption
The Golden Rule: 24 Months = 0% Capital Gains Tax!
If you hold a property for more than 24 months (2 years) under personal ownership, you are completely exempt from capital gains tax when selling. This is one of Georgia's biggest advantages!
Practical Example:
- • Purchased apartment: January 2023, $150,000
- • Sold apartment: February 2025 (25 months), $200,000
- • Capital gain: $50,000
- • Capital gains tax in Georgia: $0 (0%) - Complete exemption!
In other words: All $50,000 profit stays in your pocket. Zero tax!
How Are the 24 Months Counted?
From the date of ownership registration (not from contract signing). Keep the exact registry date!
If you sell before 24 months:
- 0-24 months (completed property): 5% capital gains tax
- Uncompleted property (before handover): 20% capital gains tax
The conclusion: If you can wait 24 months - wait. The capital gains tax savings are enormous (5%-20% of all profit).
LLC in Georgia: Sounds Cool, But...
Many investors think opening an LLC in Georgia will save them taxes or provide legal protection. In practice - it usually does not pay off.
Why LLC Is Not Recommended for Single Property Investors
Unlike what real estate marketers might tell you, an LLC in Georgia does not provide significant tax advantages for single property owners - and sometimes costs even more!
❌Disadvantage #1: No Capital Gains Exemption
A company does not receive the 24-month exemption! Even after two years, you will pay 15% corporate tax on the sale profit. That is infinitely more than an individual (0%).
❌Disadvantage #2: Dividend Tax When Withdrawing Money
After the company pays 15% corporate tax, when you want to withdraw the money to your pocket (dividend), you will pay another 5% dividend tax!
Total tax cost: 15% (profit) + 5% (dividend) = ~19.25% compared to 0% for individuals!
💸Disadvantage #3: Annual Operating Costs
- • LLC registration: $500-$1,000 (one-time)
- • Annual accountant: $800-$1,500
- • Financial reports: $300-$600
- • Business license renewal: $200-$400
- Total per year: $1,300-$2,500
On an apartment earning $12,000/year - that is 11%-21% of income lost to costs!
📋Disadvantage #4: Bureaucracy and Complications
A company requires active management: protocols, annual reports, business bank account (more expensive), higher management fees. It is not worth it for a single apartment.
✅ Personal Ownership
- • Capital gains tax: 0% after 24 months
- • Dividend tax: 0% (not needed)
- • Operating costs: $0-$200/year
- • Bureaucracy: Minimal
- Total tax cost: ~5-6%
❌ LLC (Company)
- • Capital gains tax: 15% (no exemption!)
- • Dividend tax: 5% on withdrawal
- • Operating costs: $1,300-$2,500/year
- • Bureaucracy: Heavy
- Total tax cost: ~25-30%
So When Does an LLC Actually Make Sense?
There are specific situations where an LLC can be logical:
Large Property Portfolio (5+ Properties)
If you have 5 or more properties, a company can provide legal protection and centralized management. Operating costs are spread across many properties.
Business Partnership
If you are 2-3 partners buying together - an LLC clearly defines rights and obligations. It is worth the costs.
Contractor Activity (Flipping)
If you are buying, renovating, and selling (Flipping) - that is active business. An LLC is more appropriate.
The Simple Rule:
1-3 properties for passive investment? → Personal ownership (huge savings!)
5+ properties or partnership? → Maybe a company is worth it (check with CPA)
The Winning Formula: Personal Ownership + Sell After 24 Months
The Optimal Exit Strategy:
Full ROI Example (Personal Ownership):
- • Purchase: $150,000 (January 2023)
- • Purchase tax: $0 (0%)
- • Annual rental: $12,000 × 2 years = $24,000
- • Rental tax (5%): -$1,200 (Georgia)
- • Sale: $200,000 (February 2025, 25 months)
- • Capital gains tax: $0 (0% - exempt after 24 months!)
- Total net profit: $72,800
- ROI: 48.5% over two years!
The conclusion: Personal ownership + waiting 24 months = the biggest tax savings. It is not complicated, not expensive, and simply works.
Summary: Personal vs Company - The Numbers Speak for Themselves
| Criterion | Personal Ownership | LLC (Company) |
|---|---|---|
| Purchase Tax | 0% | 0% |
| Rental Tax | 5% | 5% |
| Capital Gains (24+ months) | 0% Exempt! | 15% No exemption |
| Dividend Tax | Not applicable | 5% |
| Annual Operating Costs | $0-$200 | $1,300-$2,500 |
| Bureaucracy | Minimal | Heavy |
| Total Tax & Operating Cost | ~5-7% | ~25-30% |
For Israeli Tax Residents
Israeli tax residents must also report Georgian property income to the Israeli Tax Authority. However, the Israel-Georgia tax treaty prevents double taxation through foreign tax credits. Consult with a qualified CPA for international tax planning.
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Legal Disclaimer
The data and returns presented are for illustrative purposes only and are based on past performance or market estimates. This information should not be considered as a guarantee of returns, investment advice, or a substitute for individual tax advice. Real estate investment involves risks, including regulatory changes, currency fluctuations, changes in property condition, and local market conditions. RealFix does not guarantee the displayed returns and is not responsible for losses resulting from investment. It is recommended to consult with a Certified Public Accountant and tax consultant before making investment decisions. E&OE.
