Many people who are thinking about selling real estate want to know how exactly doing a 1031 exchange can be a beneficial course of action. In this article, we will explain how a 1031 exchange of real estate can benefit you.
Avoid a Big Tax Windfall
When preparing to sell a piece of real estate, many investors hesitate when they realize just how much they are going to be liable for in capital gains taxes. This is where a like-kind exchange can benefit you. By 1031 exchanging your real property, you can avoid this big capital gains tax windfall by deferring your gains.
Put Your Money to Work
By deferring your capital gains taxes and not having to write a big check to Uncle Sam, you are able to keep your money working for you in a continued investment. In a 1031 exchange, you don’t get to just pocket the net proceeds that would have otherwise have gone to the government in taxes. Rather, you need to move those proceeds into a continued like-kind investment. This allows you to compound and build your wealth over time by keeping your money working for you.
Defer Your Capital Gains Tax
A 1031 exchange is the best way to defer your capital gains taxes when you sell real estate. However, in order to defer all of your gains you have to meet certain benchmarks and follow specific rules. This can get complicated if you’ve never done it before. That’s why it’s important to hire a qualified intermediary as early as possible in the exchange process. Contact a 1031 exchange company today to see if your property qualifies for 1031 treatment.