Skip to main content

Benefits Of The 1031 Tax Exchange For Property Investors

Image
By

Benefits Of The 1031 Tax Exchange For Property Investors



If you’re a property investor - or are considering putting your money into real estate, - make sure you are aware of the 1031 exchange. It’s a common strategy that many investors use to limit their exposure to tax. In IRC 1031, investors can sell or give up a property and reinvest the proceeds into another, with the tax due being deferred. Let’s take a closer look at some of the many benefits the 1031 exchange can bring anyone seeking to bolster their property portfolio.

Defer your taxes

As we mentioned above, the 1031 exchange enables you to defer the tax you have to pay on a sold property at a later date. In effect, this allows you to use money due to the government to grow your property holding and defer your tax-deferred exchanges.

Reinvestment

The 1031 exchange allows you to reinvest that tax money into new property, giving you more leverage when it comes to prices. You might be able to buy a property that is significantly more valuable than you could before, as an example. Or, you could even purchase several properties, and enjoy all the investment benefits that come with it.


Climb the ladder

With this in mind, it’s clear that it is possible to use the 1031 exchange to trade up your property for one of higher value. And, you can keep doing this for as long as you wish. This puts you in a position of plowing as much money as possible into your portfolio and growing it to a level that would otherwise be out of reach. It will help you become a lot more competitive. Even with a single property, there are significant tax gains to draw upon. You can expect a large increase in your cash flow and your net worth will rise. Not only that but when your portfolio is passed down to your kids, it could be possible for them to eliminate a lot of their tax burden. We’ll look a little closer at that later.

Easing your responsibilities

As any property investor will tell you, the process isn’t as easy as buying a building and watching the profits roll in. You will be responsible for your tenants, and when you ramp this up across several properties, it can be a high workload. Not to mention the expense! Struggling investors can instead use the 1031 exchange to replace current properties with managed alternatives. It’s an easier way to manage your portfolio when your responsibilities are bursting at the seams.

No legacy

As Benjamin Franklin once said, nothing is certain in life except death and taxes. And, even death can’t escape the IRS - your heirs will be liable for all your unpaid tax. However, if you die after using 1031, things are a little different. You will still accumulate capital gains tax that needs to be paid. But, your heirs will not be liable for those accumulations. Instead, they will only have to pay for the adjusted, current value of the property.

Labels:

Comments

Post a Comment

Popular posts from this blog

Team Work - Meaning and Tips for better Team Work

By
A single brain is not always capable of making key decisions on its own. To come up with an efficient solution, an individual requires the help and advice of others. A team is established when individuals get together on a common platform with the common goal of completing a task. To guarantee optimum compatibility, team members should ideally come from similar backgrounds and have a single aim. To provide their best, the team members must complement each other and function as a single unit in tight cooperation. "There is no I in Team Work," as the saying goes, and each member must put the needs of his team first. Personal interests must take a second seat. Any team's performance is directly proportionate to the relationship between its members and their combined efforts. What is the definition of teamwork? Teamwork is defined as the sum of each team member's efforts toward the fulfilment of the team's goal. In other words, any team's backbone is its ability t
Post a Comment
Read more

Scientists discover a new theory / The fundamental property of light – 150 years after Maxwell

By
Light plays a vital role in our everyday lives and technologies based on light are all around us. So we might expect that our understanding of light is pretty settled. But scientists have just uncovered a new fundamental property of light that gives new insight into the 150-year-old classical theory of electromagnetism and which could lead to applications manipulating light at the nanoscale. It is unusual for a pure-theory physics paper to make it into the journal Science. So when one does, it’s worth a closer look. In the new study, researchers bring together one of physics' most venerable set of equations – those of James Clerk’s Maxwell’s famous theory of light – with one of the hot topics in modern solid-state physics: the quantum spin Hall effect and topological insulators . To understand what the fuss is about, let’s first consider the behaviour of electrons in the quantum spin Hall effect. Electrons possess an intrinsic spin as if they were tiny spinning-tops,
Post a Comment
Read more

19 Types Of Content Writing Services For Your Business

By
  It’s hard to know which type of content writing service is the best for your business.  There are so many  different types of content writing services  out there that it’s easy to get confused. You end up wondering if you’re choosing the right one for you. In this post, we’ll get rid of this confusion, once and for all. I’m going to list out the different kinds of writing services you could use.  By the end of this article, you’ll know whether you need a copywriter, a content writer, or a social media marketer and how they can help you achieve your business goals. This post is also useful for writers who want to hone their writing skills in a specific area. Let’s dive in and learn what types of content writing services exist and when you should use them. (Bonus – if you want to  hire the top 1%  of writers, go to the bottom to learn how). Types of Content Writing Services As we go through the list of content writing services, you will find that many of them overlap. That’s perfectly
Post a Comment
Read more