Real estate investors should find more about a1031 exchange

Everyone hates taxes, but if you are real estate investor then you probably hate them more than anybody else. You know that taxes are used to pay for your children’s school, for the roads and other things that influence your welfare, but this does not make you love them more. If you are an investors and you want to save money, and avoid paying taxes, then you should try to find more about the 1031 exchange. It is the type of strategy real estate investors use and manage to increase their wealth without paying taxes.

What you should know abbot the 1031 exchange?

When working in the real estate domain you have to pay taxes when you sell a certain property, if you also won it. If you follow this process, then you will not earn income, and this may cause you issues for your business. If you want to find a smart way to defer taxes then you should try to find more about 1031 exchange, because it is a strategy businesspersons use to avoid paying taxes on multiple types of assets. If you use this strategy you will still have to pay the taxes, but not right now, when you are at the beginning of running a business. Instead of selling the property you van exchange it with another property, and you will not have to pay the taxes if you respect some rules.

What rules should you respect if you want to use this strategy?

In the following lines you will find the most important rules you will have to follow in order to be able to benefit from this strategy. When can you use a 1031 exchange in real estate?

  • If the properties are like-kind type

If you want to change your property for another one, without paying the taxes then you have to check if they are part of the same category according to the IRS. For example you will not be able to trade a house with a car, but you can exchange an apartment complex with a duplex.

  • The replacement property cannot be cheaper in value

If you do not want to pay taxes when you exchange your property with another one, you should make sure that the replacement property does not value less than yours, because you will have to pay taxes for the sum of money you will gain extra. But you can replace your property with one that is equal or higher in value than your house.

  • You will have to respect the 180 days window

You have no more than 180 days to close the deal with the other real estate investor or owner, if you want to use this strategy without having to pay the taxes. You will have to entirely buy the new property in 180 days in order to not have to pay taxes. If you need assistance, then you can get in touch with professionals who can offer their experience and knowledge to help you successfully complete the replacement.