What is a 1031 Exchange?
You often hear people talk about 1031 exchanges, and might be wondering if this is something you should be thinking about. Or, you might wonder, maybe it is just something for big real estate investors. This is something everyone should consider when selling a home, especially in the fluctuating East Bay real estate market.
Section 1031 of the IRS tax code allows the sellers of a home to defer the capital gains taxes. You do this by re-investing the proceeds into a "like-kind" property. So, if you sell a single family home, you must re-invest in a single family home. Or, trade an apartment building for a similar apartment building.
While there are many facets to this srategy, the key things to remember are: the tax is simply deferred until a later date, the properties must be "like-kind", and the exchange must be identified within 45 days.
You often hear people talk about 1031 exchanges, and might be wondering if this is something you should be thinking about. Or, you might wonder, maybe it is just something for big real estate investors. This is something everyone should consider when selling a home, especially in the fluctuating East Bay real estate market.
Section 1031 of the IRS tax code allows the sellers of a home to defer the capital gains taxes. You do this by re-investing the proceeds into a "like-kind" property. So, if you sell a single family home, you must re-invest in a single family home. Or, trade an apartment building for a similar apartment building.
While there are many facets to this srategy, the key things to remember are: the tax is simply deferred until a later date, the properties must be "like-kind", and the exchange must be identified within 45 days.
The key benefit of a 1031 exchange is that it frees up a substantial amount of money that would have gone to the federal government immediately, allowing you to continue to use and invest it until the tax is due at a later time.
While the basic premise is simple, the tax code can be complicated. If you have questions or would like more information, I would be happy to help. I can always be reached at 510-547-5970 x57 or MSMartt@jps.net.
While the basic premise is simple, the tax code can be complicated. If you have questions or would like more information, I would be happy to help. I can always be reached at 510-547-5970 x57 or MSMartt@jps.net.
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