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What is a 1031 Exchange?

As a property owner, you're eligible for a number of financial benefits—some you may not even realize you qualify for, like a 1031 exchange.

Not sure what a 1031 exchange even is or curious about how you can benefit? Consider this your quick and simple guide to maximizing your investment profits and setting yourself up for long-term financial success. Own an investment property and want to use the IRS 1031 Exchange procedure to trade up right now? Just give me a call.

What is a 1031 exchange?

Under section 1031 of the Internal Revenue Code, a real property owner can sell his or her property, then reinvest the proceeds in ownership of a like-kind property and defer the capital gains taxes. To qualify as a like-kind exchange, property exchanges must be done in accordance with the rules set forth in the tax code and in the treasury regulations.

To break that down into simpler terms, it basically means that, if you choose to sell an investment property and put your profits towards a similar property, you can avoid paying capital gains taxes on the profit. With a 1031 exchange, you're essentially putting more money back in your own pocket.

How can I benefit?

The 1031 exchange is often overlooked—and considered one of the best-kept secrets in the Internal Revenue Code—but it can offer significant tax advantages to real estate buyers, including:

  • Decreasing your down payment by avoid taxation on sale profits
  • Upgrading to one or more new properties that allow you to diversify your portfolio
  • Consolidating several small investments into a larger single investment
  • Increase long-term purchasing power

Want to Find out More?

The world of tax benefits can be confusing—which is why it pays to have an expert on your side. If you have further questions about how to take advantage of the 1031 exchange or further benefits, just give me a call. Need to search for a few new investment properties while you're at it? I can help with that, too!

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