1031 Exchange Bill defers depreciation taxes on investment property only if the property had been a rental for the last two years. The benefit is in deferring taxes and postponing tax payments until a later date, that could be expected to have a lower tax bracket in the future.
When appropriate, this could be done by selling an investment property and then replacing it with a like-kind property, or properties that are of the same or greater value as the original.
1031 Exchange could be the solution, by consolidating several property one. Owners might be able to defer their capital gains tax, from the sale of investment property when transferring the funds to another property such as a rental.
If considering selling an investment property, it is important to obtain the advice of a tax advisor or Business Development Manager 1031 Exchange Specialist to determine whether a 1031 exchange is right for the moment.
When appropriate, it could help solved problems of depreciation, particularly for trap equity after 27.5 years of owning a property, or 39.5 years for commercial property; after there is no more depreciation to write off on such property. It could reduce risks and maximize returns on real estate investments.
Consolidating several properties into one or two could make it easier for the investor to manage those properties, rather than paying for the services of a property management company.
Investors cannot benefit from using deferred funds for their own expenses. After close of escrow on investment property, funds are to be transferred to an escrow account for the purchase the next investment property.
No loan fees are allowed to be used with these funds; on the other hand, funds could be used for deposits, broker’s commission, and exchange fees.
Section 121 Exclusion is an IRS rule come tax and gain up to $250,000., from the sale of their personal residence; a couple filing a joint return could exclude up to $500,000. from their taxable income, which could be available as a tax-write off, if title owner has lived in the property for two of the last 5 years.
An investor could be tired putting off with maintenance of the properties, tenants request for repairers, payments on disposing trash and taxes (4t’s tenants, toilets, trash, and taxes)
If there could be some co-owner’s disagreements, for instance, getting out of a fractional ownership of a rental property to purchase another whole ownership.
In fact, relocation could sometimes be done with leveraged tax deferral benefits, improving cash flow, and diversifying, consolidating, or reinvesting in one or more homes in or out of the state. One of these properties might later become investor’s next, or forever home.
If relocating out of state, we could know the best realtor in town, since we have sister offices both national-wide and world-wide.
Relocation could be stressful and exciting, so we could help with a list of local vendors and contractors, such as financial planners, accountants, declutter professionals, moving companies, packers, and home restoration.
Call me and I’ll refer you to Lisa Villarreal, Business Development Manager 1031 Exchange Specialist to determine if tax deferral with 1031 Exchange tax break is a right move, and if the Capital Gain Section 121 Exclusion is an IRS rule could be feasible.
Carlos Ezquerro, Realtor at KW Bay Area Estates
DRE: #01238493
Just text me, at (408) 898-0336.
Book an appointment with me and tell me more, I am available at my office.