Secrets To Property Selling: Learning About 1031 Exchange Rules And The Ability To Save Money When Selling A Property
Did you know that you can still make more money from the property you are selling besides what the buyer is going to pay? This is a method called 1031 exchange rules but before you can avail these terms there are requirements that you have to follow.
Before going further, what is 1031 exchange rules?
Based on the section 1031 of the IRS tax code which allows investors to defer paying any capital gains taxes on the proceeds of the sale of real estate. The profits must be placed towards the buying of a “like-kind” property.
To dive deeper into the what 1031 exchange rules are all about and how it can help you save a ton of cash in the process continue reading on.
Get to know the 1031 exchange types to find the ones that suit you better.
In terms of the deferred exchange, a particular property is sold first then a new one is bought to replace it in a certain amount of time, click here to understand more about this exchange.
Reverse exchange is a replacement property is bought then the current property is sold afterward, view here for more info.
Simultaneous exchange takes place when a property is exchanged after another, learn more about this exchange.
You must take into considerations the rules governing how the 1031 exchange happens. Which includes, the prevention of usage of exchange for previous two years as well as you cannot act as your own exchange facilitator.
What is the coverage of the 1031 exchange rules?
There is a maximum limit when it comes to the number of properties and that is three.
With a lot of investment you will be assured at least one goes through successfully. You can only stick to three potential properties that can be identified buy you must ensure that you close one of them.
It is not applicable to those who are selling their primary residences, it has to be an investment property.
You are still obliged to pay tax on the original profit for the sale plus the additional gains for the new property. There are a lot more things that you should take note and its best if you learn more about 1031 exchange rules, read more here.
Having said all of those, 1031 exchange rules can be quite complicated, that is why you should at least turn to an experienced tax associate. They are the experts in 1031 exchange rules so they can help you through it.
Share this information with those who are planning to sell their own properties, maybe it can help them understand the 1031 exchange rules better.
Equip yourself with the right knowledge on how to sell your real estate property, learn more about here.