Published on our November 2021 Newsletter
Question: What are the benefits of a 1031 exchange, and am I qualified?
Chris’ Answer: When you sell your investment property, you will be required to pay a capital gains tax on your profits at either a short-term or long-term capital gains rate. But, if you instead reinvest profits from the sale in a like-kind property of the same or greater value, Internal Revenue Code Section 1031 provides for you to defer the tax liability.
1031 Basic Qualifications:
- The new investment property must be of “like-kind” to the property being sold.
- A personal residence will not qualify for the exchange, but a vacation home used predominantly as a rental property could qualify.
- The like-kind property to be purchased must be identified within 45 days; the purchase must be completed within 180 days after the sale of the original property.
- A Qualified Intermediary must ensure that all eligibility requirements are adhered to.
- There are limitations on the amount of capital gain that may be tax deferred.
- Always consult a tax advisor before making arrangements for a 1031 exchange.
Do you have other real estate questions? Contact us!
#realestate #realtor #homebuying #homeselling #stcroix #stcroixusvi #caribbean #retirement #coldwellbanker