We talk a lot about the tax-saving benefits of 1031 exchanges. But the reality is that 1031 exchanges are not right for every single situation. In some instances it just doesn't make sense to pay the associated 1031 exchange fees. The proceeds from your relinquished property generally need to hit a certain threshold to warrant the 1031 exchange fees.
When NOT to Do a 1031 Exchange
If your state and federal tax liability (including deprecation recapture) on the sale are lower than $1,100, then you would not want to do a 1031.
Also if you sold the property and had a loss, rather than a gain, then you would not want to do a 1031 exchange.
Check with Your CPA
Best to check with your CPA before you set up the 1031 exchange to make sure you have enough profits to justify the costs involved. In most cases, the taxes far exceed the exchange fees; but you should have a clear dashboard from your CPA to know you are making the correct decision.
- 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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