When you invest in real estate, you have to have a long term vision and patience. Unlike buying stock which can be readily purchased and sold, investing in real estate does not afford a quick sale. While it is true that in years past, people were able to flip properties and make fast money in real estate, for most real estate investors the idea is to buy and hold real estate. Some investors in real estate will benefit from federal income tax breaks and other investors in real estate can hold a piece of property and later sell it and buy other property while deferring the payment of any federal income taxes until the real estate is cashed out. Real estate is not a liquid investment and you may need to consider a long term strategy or option even if you are considering a shorter term investment in real estate. Read our articles on investing in real estate and learn about problem tenants and how to handle them. Learn about finding the right team to help you navigate the world of real estate investing. And, finally, learn about how to structure your investments, insure your real estate investments and minimize your federal income taxes.
1031 Exchange – What is It?
A 1031 tax exchange is named for part of the IRS tax code. A 1031 exchange allows you to defer paying taxes on investment property including real estate, artwork, helicopters, copyrights, patents and more. You cannot do a 1031 exchange on personal property. This video gives you basic information about a 1031 exchange. For more information, check out our other 1031 exchange videos.
1031 Exchange: Qualified Intermediary
When you do a 1031 exchange you don't want to receive or touch the money involved. That's why you hire a 1031 qualified intermediary who manages a restricted account where your money's trapped. If you don't use a qualified intermediary and touch the 1031 exchange money, you lose your chance to claim a 1031 exchange on your taxes. Learn more about a 1031 exchange qualified intermediary and why they're important.
1031 Exchange: Like Kind Property
When you do a 1031 exchange to defer taxes you have to choose replacement property that's similar or "like kind." The "like kind" property may not only be real estate but also timber, air, oil or gas rights. The tax payer must exchange like for like however. Learn more about "like kind" property and its role in a 1031 exchange.
1031 Exchange: 180 Day Rule
When doing a 1031 exchange, how long do you have to acquire your replacement property? 180 days. But you have to pay attention to when you pay your taxes and if you want the full 180 days, time your acquisition accordingly. Learn about the 180 day rule for 1031 tax exchanges and how that time is calculated.
1031 Exchange: What Is a Capital Gain?
When you're doing a 1031 tax exchange, you need to know what a capital gain is. A capital gain is a profit on a capital asset. Capital gains tax is 15 percent on real estate. But if you're doing a 1031 exchange with another type of investment you'll likely pay your ordinary income tax rate on the capital gain.
1031 Exchange: 3 Rules For Property
When you're doing a 1031 tax exchange you need to follow three rules for identifying property. The three property rule allows you to consider three replacement properties without taking their fair market value into account. If you're looking at more than three properties for a 1031 exchange, you may be subject to the 200 percent rule or the 95 percent rule. Learn what these 1031 exchange rules are.
1031 Exchange & Capital Gains Tax
When you do a 1031 tax exchange it can save you capital gains tax and recapture depreciation tax. Taxes without a 1031 exchange can range 15 to 25 percent. They will be higher the more valuable your investment property or if you've claimed depreciation on the asset you're exchanging. Learn how to save money with a 1031 exchange.
1031 Tax Exchange Fees
When you hire a 1031 tax exchange company to help you exchange investment property you will pay some fees. 1031 exchange fees vary depending on the timing of the 1031 exchange. Fees will be higher for a 1031 exchange where the investor has acquired the new property before selling the old one. 1031 exchange companies factor risk into their fees.
1031 Exchange: Death And Taxes
A 1031 exchange may be an interest-free loan from the government. A 1031 exchange can be useful when someone inherits a property after the owner's death. A 1031 exchange can help you take advantage of a step up in tax basis.
1031 Exchange Investment Property: What’s Ineligible
You may want to avoid taxes when you sell your investment property. One option is a 1031 exchange. Not all investment property is eligible for a 1031 tax exchange. Learn which properties can't be used for a 1031 exchange.