Did you know that you can still make more money from the property you are selling besides what the buyer is going to pay? This is a method called 1031 exchange rules but before you can avail these terms there are requirements that you have to follow.
Before going further, what is 1031 exchange rules?
Section section 1031 of the IRS tax code covers the 1031 exchange rules which allow investors to defer paying any capital gains taxes on the proceeds of the sale of real estate. This is if the profits are put towards the purchase of a “like-kind” property.
To dive deeper into the what 1031 exchange rules are all about and how it can help you save a ton of cash in the process continue reading on.
To know more about how it works, it is best if you get acquainted with the 1031 exchange types.
In terms of the deferred exchange, a particular property is sold first then a new one is bought to replace it in a certain amount of time, click here to understand more about this exchange.
In reverse exchange it covers the process of buying the replacement property first then selling the current property after, view here for more details.
Simultaneous exchange takes place when a property is exchanged after another, learn more about this exchange.
It must be considered that there are rules in 1031 exchange. Among of these is the prohibition of using the same exchange from the previous years and acting as your own facilitator.
What is the coverage of the 1031 exchange rules?
The maximum limit of properties for the 1031 exchange rules is three.
Through this you will be able to make sure that at least one of it successfully goes through. You can only stick to three potential properties that can be identified buy you must ensure that you close one of them.
To be able to avail the 1031 exchange rules you have to sell a property that is an investment type.
You must remember that you still have to pay for the tax that is on the original profit and the gains for the new property. You can learn all about the ins and outs of 1031 exchange rules here.
The 1031 exchange rules can be complicated, that is why it is recommended to ask for tax associate to help you in the process. They are the experts in 1031 exchange rules so they can help you through it.
Feel free to share this information with your friends or family who is looking to sell their real estate property.
You can learn more about ways to sell your real estate property.