1031 Exchange of Real Estate (tax deferred exchange)
Always check with your financial advisor - everyone's situation is unique! This should happen right at the beginning, before looking at homes.
The tax code provides real estate investors with the ability to defer taxes by investing in another property held the same way as the investment being exchanged, known as a 'Like Kind' exchange.
We have the perfect storm for 1031 exchanges.
- Capital gain taxes have increased.
- Net Investment Income tax (NIIT) has come into play for higher earners.
- Investors have seen significant rises in real estate values
- Rents have gone up in line with the rises in values
Why do an exchange?
- Exchange out of an asset that is almost paid off into one that is leveraged with a mortgage
- Diversification in a different area, or type - single family / commercial / self storage / multifamily etc
- Consolidation of real estate into one type - single family into multifamily
- Estate Planning
Watch this video to learn more - start around 8 minutes if you are interested in Capital gains tax.
Which property qualifies for an exchange?
QUALIFYING REAL PROPERTY
The types of real property which can be exchanged under Section 1031 are very broad. Any real property held for productive use in a trade or business or for investment, whether improved or unimproved, is considered like-kind real property. Examples of like-kind real property include:
Unimproved property for improved property;
Fee for a leasehold with 30 or more years;
Vacant land for a commercial building;
Duplex for a retail property;Single-family rental for a multi-family apartment;
Conservation easement for warehouse to be used in the taxpayer’s business;
Industrial property for rental vacation property in a resort area.
If you are looking for a company to guide you through a like-kind exchange, contact
Asset Preservation Inc
Tell them AllstarPowerhouse sent you! We can also have a real estate agent who is well-versed in 1031 exchanges contact you.
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