Tax Deferred Exchange Benefits

Tax Deferral - One of the primary benefits of a 1031 Exchange is the tax deferral of long term capital gains. This can save you a significant amount of money upfront and allow you to reinvest more of your proceeds.

Increased Purchasing Power - By deferring taxes, you have more equity available to reinvest in your new property.

Diversification - You can use a 1031 exchange to diversify your investment. For example, you can swap a single property for several different ones, or trade a residential property for a commercial property and vice versa.

Upgrading Property - If you want to upgrade to a property that offers better returns or meets your investment goals, a 1031 exchange can facilitate this transition without an immediate capital gains tax hit.

Income Stream - If your goal is to generate a more stable income stream, you might use a 1031 exchange to move from a property that’s been less profitable due to vacancy or tenant credit worthiness to one that has higher rental income potential.

Step-Up in Cost Basis - In the event of the property owner's passing, the heirs will receive a step-up in cost basis equal to the fair market value of the property. The heirs may immediately sell the property without incurring any capital gain.

Types of Exchanges

1031 Exchange - The most common exchange, the 1031 exchange allows real estate investors to sell a property and reinvest the proceeds into a similar property, deferring capital gains taxes on the sale. This strategy is commonly used to build wealth by deferring taxes while upgrading or changing property investments.  See below for 1031 exchange deadlines.

Reverse Exchange -A reverse exchange allows real estate investors to acquire a replacement property before selling their current property, in contrast to a traditional 1031 exchange. In this scenario, the investor must first secure the new property and then sell the original one, with a qualified intermediary holding the title of the new property until the old one is sold. This strategy provides flexibility when an investor finds a desirable property but hasn’t yet sold their existing asset.  Contact our team for deadline details.

1033 Exchange - Applies when a property is involuntarily converted, such as through condemnation, eminent domain, or natural disaster. The property owner can defer capital gains taxes by reinvesting the proceeds into a similar property within a specific time frame. This exchange provides a way for property owners to recover from unexpected losses while avoiding immediate tax liability. Contact our team for deadline details.

1031 Exchange Deadlines