What is a 1031 Tax Deferred Exchange?

You have decided to upgrade to a new real estate investment or business property, and get a new one. But you really do not want to have to share the money you've made with the Revenue has wanted to collect his cut. 

There is a way to prevent this from happening. Investors can thank the IRS for Section 1031 because it provides a basis for real estate investors, property investors and business owners by allowing them to postpone their capitial gains taxes indefinitely by buying a property that resembles the one they give up. Section 1031 exchange allows you to waive payment of taxes on the sale of your investment property or commercial property - as long as you use the money from the sale to buy a second property of equal or greater value. 

Benefiting from the 1031 Exchange Act:

A) property owners are able to eliminate taxes that they would otherwise pay to sell their property. 

B) The removal of taxes puts more money in the owner's pockets and allow them to invest in more investment properties. 

The Section 1031 Law does'nt include: loans, equities, bonds, trust, partnership interest, Personal Residences 

... It is good to know that § 1031 states that you can defer your capital gains taxes as long as you buy a property similar to the abandoned estate. Actually, you can sell your investment property and use the proceeds you invest in a second property is like kind. 

Here are a few things you should be sure before conducting a 1031 Tax Exchange: 

A) In comparison to the cost of your waiver-estate, the new property you buy must be of equal or greater value. 

B) The capital gains that you acquire from the property you sell, be used to purchase new housing. 

C) So the new house you buy, be it known, "as such". One example is that your renunciation of property is a property that was used for your business, so the new housing (the new) needs to be the same. 

You can begin to exchange your property for as long as you have ensured that requirements are met. 

1st You must first choose a qualified intermediary to manage and facilitate your 1031 exchange for you. 

2nd Sell your investment property to the person who wants to buy and make sure you let them know that you're doing a tax deferred exchange. 

3rd Within forty five days or less identifies the new dwelling. 

4th So it is necessary to claim your new home within 180 days. 

The process of 1031 tax exchanges can sometimes be long and as a useful quality to possess is patience - but in the long run you will benefit financially from it.