Tax Deferred 1031

Written by Linda Alexander
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Tax deferred exchanges help you to trade your real estate while avoiding paying large taxes. If you are selling investment property to buy more investment property, you can defer your capital gains taxes through a 1031 exchange. Specialists in this field will even find suitable properties for you to trade in this type of transaction.

1031 Tax Deferred Exchanges in Real Estate

Although you can do this with different types of real property, in general, 1031 exchanges are done with real estate. The government allows investors to continue reinvesting for an indefinite period of time while deferring taxes. The capital gains taxes are finally due when you sell the property for a profit. It's a smart way to grow your investments tax-free.

If you don't make a profit, and show a loss on the sale, you can claim depreciation on your taxes and avoid paying them. Usually, however, long-term real estate investments appreciate, so take advantage of these tax-free dollars and reinvest them into more property. You can exchange one property for several or many for one, as long as you are trading equal values or trading up to more valuable property.

When you sell your real estate, you must plan the 1031 exchange ahead of time. There are strict time limits to adhere to in order to claim the tax deferral. Therefore, it's wise to know you want to exchange property when you are ready to sell your original investment or business property. You can also save time and money by hiring a real estate company to locate qualified properties for you.

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