Defer Or Never Pay Tax On Your Investment Property!! Lets Talk 1031 Exchanges. A POWERFUL FINANCIAL TOOL.
As a 1031 Investment Specialist – I share with you that when you sell your interest in your investment property and buy another, you may face a large capital gain and the prospect of federal and state taxes. Let me show you how to NOT TO.
Welcome to a powerful tool that can work to your financial advantage – 1031 Exchanges.
When you sell your real estate property or an interest in an investment property and buy another, you may face a large capital gain and the prospect of paying federal taxes on it – and state taxes as well in Arizona.
So I’m suggesting a tax-deferred exchange under section 1031 of the Internal Revenue Code.
A 1031 Exchange allows you to dispose of investment properties and acquire ‘like-kind’ properties while deferring federal capital gain taxes. Most states with a capital gains tax offer a similar tax advantage, too. Bottom line: a 1031 Exchange lets you reinvest sales proceeds that would otherwise be paid to the government as capital gains taxes.
Let’s assume you acquired a property for $800,000 for years ago. It has a current mortgage balance of $600,000 and has appreciated to $1,800,000. During the period you own the property you have taken depreciation deductions of $100,000. Your long-term capital gains tax with would total $175,000 calculated as follows:
$1,000,000 appreciation gain x 15% = $150,000;
$100,000 depreciation recapture x 25% = $25,000.
Any real or personal property can be exchanged, provided it’s held ‘for productive use in a trade or business’ or ‘for investment’, and is exchanged for property of like-kind that will also be held for one of the same purposes.
Most real property is considered ‘like-kind’ to other real property. A single family rental unit, for example, may be used to acquire another single family residence, or to purchase a warehouse, retail center, or office building. Like-kind limitations on personal property are more restrictive: assets must be classified similarly under government accounting classifications.
Defer or never-pay tax. The rules are clear and simple.
Please call me to discuss how to get into 1031 Exchanges and get into this powerful real estate investment tool.
Richard Bazinet pllc, Realtor, MBA, CRS, ABR, 1031 Exchange Specialist. 602.300.7007, firstname.lastname@example.org