Lots of people selling real estate investment properties think that you must pay capital gains when selling your property, but this is not always the case.
IRS Code Section 1031, offers real estate investors the opportunity to reinvest the capital gains (profit) from the sale if you exchange that property for another property.
It doesn’t necessarily need to be “Like Property” either!
If you are planning to sell an investment property that you own, you really should think about using a 1031 tax deferred exchange.
It will allow you to defer 100% of both Federal and State Capital Gains Tax.
1031 Exchanges allow the investor to reinvest their capital gains in another property, where the principal may continue to grow through future exchanges.
Enabling the “Exchanger” to keep more Capital to reinvest and to minimize tax liability, when the real estate transactions are well structured and completed correctly.
Together with the help and advice of an Experienced Realtor, such as those at Nance & Associates, Realtors to help you locate a great investment property, can make a great investment strategy!
Some facts that you should know
- Originally, 1031 exchanges were to “Exchange Like Properties” to the same Individual/Entity, but that is not the situation any longer.
- You should know that “Like Properties” once meant. Duplex for Duplex, Single Family House for Single Family House, Vacant Land for Vacant Land, etc. The rules have been expanded to allow you to exchange an investment condominium for an investment townhouse for instance.
- A common misconception is that only large-scale investors can use a 1031 tax deferred exchange. The great thing about 1031 exchanges is that it can apply to a variety of investment properties. It works the same way for an investor selling an apartment complex as it would for an investor selling a rental house.
The information contained herein has been obtained through sources deemed reliable but cannot be guaranteed as to its accuracy. Any information of special interest should be obtained through independent verification.
This information is general in nature and is for general informational purposes only, and should not be construed as legal or tax advice or a substitute for legal or tax professional counsel.
Nance & Associates Realtors
Secondary phone: 888-834-7474