Types of 1031 Tax-Deferred Exchanges
You have several options if you are considering a like kind exchange.No matter what kind of investment property you currently own or are considering acquiring, you can save taxes through a 1031 tax deferred exchange. By working with a Qualified Intermediary like 1031 Exchange Place, you can participate in:
- Simultaneous exchanges – trading a relinquished property for a replacement property at the same time.
- Delayed exchanges – selling your relinquishment property now, and then holding the funds through the QI for a set amount of time while you find the right replacement property.
- Build-to-Suit Exchange – selling a relinquished property, buying a replacement property, then with the funds from your original sale, spending time and money on improvements or construction for the new property.
- Reverse Exchanges – acquiring the replacement property in advance of selling the relinquished property.
- Personal Property Exchanges – trading something besides real property for items that are like-kind or like-class, as defined by IRS rules (which exclude foreign property).
The key to a successful 1031 tax exchange or a 1031 like-kind exchange is knowing and understanding the rules that apply to the sale and acquisition of property. Working with 1031 Exchange Place gives you access to some of the most knowledgeable 1031 tax exchange experts in the business; providing options for your exchange and helping you get the most from your 1031 exchange dollars.
Saving More of Your Money with Tax-Deferred Exchanges
When you work hard for the money you earn, so you want your money working for you! You want to find ways to keep as much of your money as possible, and part of that is avoiding paying excessive taxes. Likewise, when buying and selling real estate, you want to keep as much of your money working for you as possible. If you were to undertake a typical real estate transaction, any gains that you realize from the sale of an existing property will be taxed even if you reinvest in another property.
To protect against these taxes, the experts at 1031 Exchange Place can help you with a 1031 tax exchange, named after section 1031 of the IRS code. A 1031 tax deferred exchange allows you to defer the taxes on the sale of a relinquished property, as long as you reinvest the proceeds of the 1031 like-kind exchange into another property that is acquired for business or investment purposes. Since you are not paying tax on the gains from the sale of the original property, you keep the entire proceeds working for you. Even if you exchange the property for a different type of investment—for example, selling agricultural land and investing in a retail property—this is still considered by the IRS as a 1031 like kind exchange and not be subject to taxes.
Why a 1031 Tax Exchange?
There are several different taxes applied to property sales, which can add up to a lot of money if you are buying and selling real estate on a regular basis, or even if you just have a one-time sale. Whenever you are thinking about selling real estate, the benefits of 1031 tax deferred exchange should be considered:
- This is generally the only option to postpone (and in some cases, eliminate) taxes owed on property sales.
- The money you save by not paying taxes can be reinvested in new property, so you have more of your funds working for you.
- Depreciation recapture is postponed until a later date or eliminated altogether.
- If you are frequently acquiring and disposing of properties as a way to maintain a diversified portfolio, you won’t have to spend your hard-earned money on taxes with every transaction.