Real Estate Tax Advantages

Written by Linda Alexander
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The tax deferment advantage of a 1031 exchange is only part of its appeal. There are lots of other reasons why you might want to perform such an exchange. The real estate market is constantly growing and changing, and your needs as an investor might change over time too. It's good to know that there are ways to protect you from paying capital gains taxes until you are ready to do so.

Starker exchanges give you leverage in your real estate investments. You can exchange property types to increase your income by switching to larger buildings, property in more exclusive areas, or from residential to commercial property. With the dollars you save on taxes, you can buy a more expensive property with greater income potential.

As you move closer to retirement, you might want to ease off your property management duties. Purchasing a triple net leased property or a TIC property will enable you to have a steady income without the day to day hassles of being a landlord. Or, you can diversify your holdings. Trade one property for several, or purchase several fractions of TIC properties.

Consolidate Properties

If you are looking to simplify your holdings rather than diversify them, you can also consolidate properties. You can trade several like kind properties for one, or trade buildings for parcels of land. The flexibility of 1031 exchanges and the tax advantages they provide allow investors to delay their taxes as long as they choose to do so.


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