Would you rather have a low down payment or a low monthly payment?How significant is the interest rate when it comes to home buying?Sometimes, you won’t get everything you wanted, this is

Dated: March 14 2021
Views: 106
1031 Exchange – What is it and How Does it Work?
When you sell a real estate investment, you make capital gains, or at least that’s the hope. Those profits come at a price, though. You may owe taxes on the income, which reduces the money you earn.
In some cases, there’s a way around it.
The 1031 exchange or like-kind exchange is a way around the tax issue. Not everyone qualifies and you must follow the instructions to the letter to make it work. As always, check with your attorney and tax professional.
Here’s what you must know.
Here is the jist of a 1031 Exchange
You can do the 1031 exchange in one of two ways. A simultaneous 1031 exchange occurs when you sell a property and buy another on the same day. You transfer the profits from one property to another, never taking possession of the cash, which would trigger the tax liability.
A deferred 1031 exchange occurs when you sell a property, but don’t buy another property right away. To qualify, you must:
Who Qualifies?
Real estate investors may qualify for the 1031 like-kind exchange. This includes individuals, partnerships, corporations, and LLCs. Anyone who operates as a business may qualify, but only properties you invest in, not live in, count.
What Properties Count?
The properties you ‘exchange’ must be similar, but not identical. For example, both properties must be real estate. You can’t exchange real estate property for a real estate trust, for example. It must be two properties.
As far as how alike they must be, differs. For example, you may sell land with a rental house for vacant land and it would count. As long as both properties are used in a business fashion, not for personal use, they may count.
Additionally, both properties must be within the United States. For example, you can’t sell one property here and buy another abroad and use the 1031 exchange.
1031 Exchange Helps Investors Avoid Capital Gains Taxes
If you’re an investor looking to keep your investments going, the 1031 exchange can help lower your tax liability. It takes careful planning and adhering to strict timelines to make it work. We highly recommend using an exchange facilitator to help ensure you meet all deadlines so you can take advantage of the 1031 exchange.
Work with your tax advisor too, as this affects your taxes and what you will (or will not) owe. While you’ll pay taxes eventually on the capital gains you earn on real estate, it may not have to be right away if you continue investing after selling a property.
Justin Hemker is a Triangle Area Real Estate sales and marketing expert. You will have a hard time finding a Realtor who truly cares for and works harder for his clients, has more passion for his job,....
Would you rather have a low down payment or a low monthly payment?How significant is the interest rate when it comes to home buying?Sometimes, you won’t get everything you wanted, this is
What does it mean when a house is “priced to sell”?As a seller, if you want to list your house to sell, you’ll need to know the market. How can you know the market? This is where
Sometimes we have to go through difficult experiences in order to appreciate the outcome more. Home buying can certainly be a taxing journey, but when you finally get the key to your new home,
First Time Wake County NC Home Buyer ExpensesThinking about taking the plunge into buying your first Wake County NC home? First of all, Congrats! What an exciting journey you’re on. Expect to