1031 Tax Exchange

Consider this:

Whether an investor owns a property all cash or with leverage, the benefits of a tax deferral are significant. The tax dollar saved can be utilized to purchase additional property. The example below shows the significant advantage of exchanging for an investor who sells a $425,000 property that has been fully depreciated and that was debt-free. This example assumes the client is subject to a combined federal and state tax bracket of 35%.

The investor who executed a property 1031 Tax Deferred Exchange defers the payment of capital gains taxes.
Example

	Sale	Exchange
Net Equity (minus cost)	$400,000	$400,000
Taxes (35%)	$150,000	None
Funds to Reinvest	$250,000	$400,000
If an investor leverages his new property to 70% by putting 30% down, he/she could purchase properties totaling:
	Acquisition Value
	$833,000	$1,300,000

By completing a 1031 Tax Deferred Exchange, the investor has increased his/her portfolio by $467,000!!!

Remember rental houses qualify as investment property. The 1031 Tax Deferred Exchange is one of the last tax shelters allowed by the IRS.

Contact me by clicking on this link to find out more about 1031 Tax Deferred Exchanges and find out if your investment property qualify.