Are you considering selling an investment property and don’t want to pay huge capital gains taxes? If so, there’s a way to defer them and keep your money working for you.
Hi, I am Terry Tucker with eXp Realty here to break down on why a 1031 exchange might be right for you.
In real estate terms, a 1031 exchange lets you reinvest your profits and defer taxes so you keep more of your money working for you.
The 1031 Exchange has three major benefits:
First off, it is tax deferral. Instead of losing a big chunk of profit to taxes, you reinvest 100% of your equity into a new property.
Second, it keeps you going with your real estate wealth-building. You can keep upgrading to larger or more profitable properties, growing your real estate portfolio faster.
Finally, you will be able to keep it all in the family by passing properties down with Estate Planning. This allows you to continue doing 1031 exchanges and eventually pass the property to your heirs so they avoid capital gains taxes entirely.
But be careful, if you are planning on doing a 1031 exchange there are strict rules. If you do not follow these rules you can risk the tax benefits.
First off, you must identify a new property within 45 days and close within 180 days to qualify for tax deferral.
The new property must be a like-kind property and investment; it cannot be used to purchase a primary residence.
You also have to use a qualified 1031 exchange company to transfer the funds as you cannot touch the money
and finally, you must reinvest all proceeds to defer 100% of the taxes with the new property in equal or greater value.
If you follow these rules, you will keep more money working for you. But before you begin a 1031 exchange it is always best to consult your tax professional and an experienced agent like me!
If you’re thinking about selling your investment property and want to maximize your returns, call me to schedule your strategy session today!
