top of page

1031 Real Estate Exchange

1031 Real Estate Exchange

As a real estate investor, you want to ensure you are getting your value and saving when it comes to taxes. 1031 Real Estate exchange is an important part of real estate investing. Here are the rules for this new tax-saving strategy.

RULE 1: PROPERTY MUST BE LIKE-KIND When selling your property the new property you are buying has to be "like-kind". The rule states, the properties must serve for business use, productive use in trade, or investment. example, let's say you are selling a commercial townhome and then you are buying a commercial building the rules apply because they are both held for business purpose. Let's look at an example where the 1031 real estate exchange does not apply. Let's say we're selling land to a developer to purchase a second home. This would not recognize as a 1031 exchange due to the fact it negates the purpose of being held for business, trade, or investment purposes, so they differ in kind. RULE 2: EQUITY AND DEBT MUST BE REINVESTED You have to make sure to avoid the capital gains taxes, the property value of the new property must be equal to or of greater than the value of the property you’re selling. For example, the property that is being sold is $450,000 and the new property is worth $400,000, now you have $50,000 leftover its subject to capital gains tax. The tax charge is usually as high as 35% RULE 3: TITLES MUST BE HELD BY THE SAME OWNER Last, you have to make sure the ownership records for both properties are in the same on both titles. This can be your name, or it can be the name of a pass-through an entity, such as an LLC or trust account. When selecting the 1031 real estate exchange seek a tax accountant for advisement. If you are ready to file ensure you are using the 8824 form. Also, if you need more information on how to file contact Direct Point Accountant Firm at (954)546-3582 or visit us at https;//


bottom of page