Many taxpayers have availed themselves of the tax-saving benefits of the like-kind exchange. But as we’ve discussed before, a 1031 exchange allows you to defer your capital gains tax, not avoid it. So when do you need to pay that tax? In this article, we will explain when you need to pay your deferred capital gains taxes on 1031 exchange property.
Capital Gains Taxes
When you sell a property in a 1031 exchange and move your net proceeds into a new replacement property you are not required to pay those capital gains taxes. However, those taxes do not just disappear. If you sell your replacement property in a standard transaction at any point in the future, you will then have to pay the capital gains taxes on that sale.
Defer Until Death
When it comes to 1031 exchanges of real estate, the ideal long-term strategy is to defer your capital gains taxes until death. If you are ready to sell your replacement property at some point in the future, consider doing another 1031 exchange into a bigger property. That way you can keep your money working for you in continued investments, while avoiding capital gains taxes all your life.
Minneapolis 1031 Exchange
If you are getting ready to sell a piece of real estate, but are dreading the capital gains taxes, consider a 1031 exchange to defer those taxes. A like-kind exchange allows you to avoid a big tax windfall on the sale of real estate so long as you move those net proceeds into like-kind property. Contact our Minneapolis qualified intermediaries today to discuss the details surrounding your like-kind exchange. We have been facilitating 1031 exchanges in the Twin Cities and around the country for decades.
- 1031 Hotline: If you have questions about 1031 exchanges capital gains taxes, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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