WHAT IS A 1031 EXCHANGE? | How to defer taxes | Real Estate Miami

What Is a 1031 Exchange? How Savvy Investors Use 1031s to Defer Capital Gains and Build Wealth? Contact me Here 👉 https://taplink.cc/realtor.katya A 1031 exchange is a swap of one real estate investment property for another that allows capital gains taxes to be deferred. The term—which gets its name from Section 1031 of the Internal Revenue Code (IRC)—is bandied about by real estate agents, title companies, investors, and more. Some people even insist on making it into a verb, as in, “Let’s 1031 that building for another.” IRC Section 1031 has many moving parts that real estate investors must understand before attempting its use. An exchange can only be made with like-kind properties, and Internal Revenue Service (IRS) rules limit its use with vacation properties. There are also tax implications and time frames that may be problematic. If you are considering a 1031 exchange—or are just curious—here is what you should know about the rules. KEY TAKEAWAYS 👉 A 1031 exchange is a tax break. You can sell a property held for business or investment purposes and swap it for a new one that you purchase for the same purpose, allowing you to defer capital gains tax on the sale. 👉 Proceeds from the sale must be held in escrow by a third party, then used to buy the new property; you cannot receive them, even temporarily. 👉 The properties being exchanged must be considered like-kind in the eyes of the IRS for capital gains taxes to be deferred. 👉 If used correctly, there is no limit on how frequently you can do 1031 exchanges. 👉 The rules can apply to a former principal residence under very specific conditions.

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