If you currently own investment property that you’re considering selling to buy an additional property, the 1031 tax-deferred exchange is your new best friend.
“A 1031 Exchange is a tactic that wealthy investors use to grow and diversify their real estate portfolio without paying any capital gains tax. Basically, you’re trading one asset into another and it defers the taxes into the future.”
In real estate, a 1031 exchange is a swap of one investment property for another that allows you to defer capital gains taxes. It gets its name from Section 1031 of the U.S. Internal Revenue Code, which allows you to avoid paying capital gains taxes when you sell an investment property and reinvest the proceeds from the sale (within certain time limits) in a property or properties of like kind and equal or greater value. In general, any real estate held for investment or business purposes in the US is considered like-kind, and the difference in type, grade, or quality doesn’t matter.
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