A 1031 exchange allows you to defer your capital gains taxes when selling real estate and keep your hard-earned money working for you in a continued investment. That all sounds great, but the first question many people ask is - “What’s the catch?” In this article, we are going to talk about whether or not a 1031 exchange comes with any strings attached.
You’re Deferring Taxes, Not Making them Disappear
A common misconception surrounding 1031 exchanges is that they allow taxpayers to make their capital gains taxes disappear when selling real estate. In reality, you are only deferring these taxes until a later date (i.e. when you decide to sell your replacement property and “cash out”). A like-kind exchange is still a very beneficial tool for taxpayers to save money, but it’s important to understand that you are not completely eliminating your tax burden.
Rules & Regulations
There are also many rules and regulations that you need to abide by in order for your exchange to be recognized as valid by the IRS. You’ve got to be sure to hit your 1031 deadlines, and remember to identify your replacement property in writing.
The qualified intermediaries at CPEC1031 (Commercial Partners Exchange Company) work tirelessly to facilitate real estate exchanges for taxpayers all over the United States. If you’re interested in learning more about the tax-saving benefits of a 1031 exchange, don’t hesitate to reach out to our intermediaries today to set up a time to chat. You can find us at our main office in downtown Minneapolis, or at one of our satellite offices around the country.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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