Are you looking to sell investment real estate in Wisconsin but are concerned about a potential capital gains tax hit? If so, a 1031 exchange may be the right option for you! Read on to learn more about how 1031 exchanges work in the state of Wisconsin and whether you are a good candidate.
How Wisconsin 1031 Exchanges Work
In the simplest terms, a 1031 exchange allows you to sell a piece of real estate and defer your capital gains taxes on the sale provided you reinvest your sales proceeds into a like-kind replacement property. That may seem easy, but there are numerous rules and guidelines you need to follow in order to defer all of your capital gains taxes in a 1031 exchange.
The first thing to keep in mind is that timing matters in a 1031 exchange. You only have a total of 180 days to complete a 1031 exchange once you begin the process. The first 45 days of that period are designated as your identification period, during which time you need to identify the replacement properties that you wish to exchange into. You also need to make sure that all property involved in the 1031 exchange is like-kind and held for business or investment use. Personal property is not allowed in a 1031 exchange. So your primary home in Green Bay would not qualify for 1031 exchange treatment, but a rental property in Eau Claire would qualify.
Common Types of 1031 Exchanges in Wisconsin
There are three common types of 1031 exchanges that can be utilized with Wisconsin real estate:
Forward 1031 Exchange. A forward exchange is the most commonly used type of 1031 exchange in Wisconsin. It involves selling a relinquished property and then exchanging into a like-kind replacement property.
Reverse 1031 Exchange. As the name implies, a reverse 1031 exchange in Wisconsin operates in reverse while still having the same ultimate goal of tax deferral. With a reverse exchange, the replacement property is acquired first, and then the relinquished property is sold. This is a good option when the real estate market is competitive and replacement properties may be difficult to find within the 180 day exchange period.
Construction 1031 Exchange. A build-to-suit construction exchange allows you to use some of your 1031 exchange sales proceeds to build improvements on your Wisconsin replacement property.
Wisconsin 1031 Exchange Resources & Links:
Below you will find some links and resources that may be useful to taxpayers looking to 1031 exchange real estate in the state of Wisconsin:
1031 Qualified Intermediaries in Wisconsin
If you are interested in learning more about the tax-saving benefits of 1031 exchanges, contact our Wisconsin qualified intermediaries today. At CPEC1031, LLC we have over two decades of experience facilitating 1031 exchanges throughout the state of Wisconsin, including the cities of Green Bay, Eau Claire, Wausau, Milwaukee, and more. We can put our years of experience to work for you and do everything in our power to ensure your 1031 exchange is successful. Contact us today to learn more about our services and how we can help with your next 1031 exchange in Wisconsin!