What are 1031 Exchanges in Real Estate Investing?
Land Up Local Highlights
A ‘1031 exchange’ is an IRS rule that helps real estate investors delay the payment of taxes on investment properties after their sale if they reinvest the gains into another property. There’s more to the rule so join us to explore how you can use a 1031 exchange on your investment property.
Transcription
IRS code 1031 or 1031 exchange is a powerful tool used by real estate investors to maximize their profit - but it is a tool that should be known by all potential investors. A 1031 exchange allows a real estate investor to sell their property and purchase another one without incurring a capital gains tax that you would typically see with a profit on a regular sale.
Because the 1031 exchange defers the capital gains tax to a later date, you can use that fund immediately onto your next investment property. You may invest that money into one or multiple properties of equal or greater value. Let's say you sell an investment property and make $100,000 profit. Instead of paying $15,000 in capital gains tax, you can use a 1031 exchange to use that fund.
There are a lot of requirements for a 1031 exchange, but the main one to remember is that it must be used for business or held for investment. At Land Up, our Texas Land Specialists can help guide you through the complexities of a 1031 exchange and help you find your next investment property. Give us a call today.