Exchanging real estate properties under the 1031 Exchange rule helps you save tax on the property due in a calendar year. As a potential investor, you can always invest in land properties and real estate business, invest in multiple opportunities and gain investment return. If you are a buyer or a determined investor who aims for long-term and substantial returns, investing in real estate is ideal. On average a company charges USD 850.00 to $1,200.00 on every exchange made under section 1031 Exchange. Consultation should be made with the best and flourished 1031 Exchange company to help you exchange your property and get an exemption from payable tax on property.
How to Avoid Taxes in the Process of 1031 Exchange?
To avoid paying tax on property gain value:
- Trade your real estate property with any other property having the same cash value.
- After a successful 1031 Exchange, reinvest all your holdings and gains in the replaced property which you acquired in the exchange.
- Increase and maintain the payable debt on the acquired property.
The prime motive for conducting a property exchange under the 1031 exchange is to avoid capital gains tax.
Why Is It Advisable to Have a Qualified Attorney?
Every lawful act requires a qualified attorney to represent the clients’ case. The Bureau for Internal Revenue Service requires you to have a qualified attorney to present your case and perform a documented property transfer under 1031 Exchange. Your experienced attorney would assist you in filing paperwork and identifying the property of the same value and capital gain. The qualified attorney would help you identify various tax incentives and schemes to save your tax and capital. Filing for a tax rebate is a tedious task; it is better to get your attorney involved when filing for an exchange under the 1031 Exchange act. Develop an effective and tax-deferred strategy while planning for an exchange of property.
Steps to Be Taken Before Making a Property Exchange Under 1031 Exchange
Before you sell and exchange your property under the 1031 Exchange act, you must ensure to find and acquire a suitable exchange replacement property that best aligns with your financial and lifestyle goals. There are three crucial and important dates and events to keep an eye on during the timeline when your 1031 Exchange occurs. When your old property closes, you will have an ultimatum of 45 days to identify and analyze your options about properties you want to acquire as a replacement. The day you close your property, your hunt for a new and compact living starts. Within the limit of 180 days, you are required to acquire a new replaced property to be finalized under the 1031 Exchange.
You must ensure that you leave no valuable artifacts or possibilities behind which might dent you in your tax filing. Follow all laws regarding the transfer of property under 1031 Exchange. When you acquire your new property, make sure that you have closed on your replaced property and not on any unregistered piece of land.