Top 5 Reasons to do a 1031 Exchange
By Josh Slaybaugh, President, Trade Up 1031, Inc.
#5 - You own appreciated commercial or investment real estate This one is pretty straightforward. If you own any property outside of your primary residence (excluding an unrented vaction home), you are able eligble to use a Section 1031 exchange.
#4 - You think now is the time to sell and capitalize on this appreciation Commercial property values have soared over recent years and many think we may be at the top of the market. If you’re ready to put your property on the market now, you may be able to get a great price for it. This way, you can lock in that appreciation and roll it into another property.
#3 - You have a low cost basis and/or have depreciated the property for tax purposes The current tax rate for depreciation recapture is a flat 25%. Depending on how much you paid and how much you’ve depreciated, you could face another huge tax burden if you don’t use a 1031 exchange to defer it.
#2 - You’re willing to sell the property you own and re-invest the money into another commerial or investment property A 1031 exchange has two main parts: selling your “relinquished” property and purchasing a “replacement” property. The general rule of thumb is that you need to buy a property of equal or greater value and use an equal or greater amount of financing on the replacement property to have a tax-deffered exchange.
#1 - You don’t like paying unecessary taxes to the government! One would think this is obvious, but it’s not. Every day owners sell properties without even considering a 1031 exchange. Mostly, this is due to a general a lack of awareness that Section 1031 even exists and, in part, getting little or poor guidance from some of those in the tax and real estate arenas.
The typical property owner will face a total tax liability of 21-23% when selling a piece of commercial or investment real estate. By doing a little homework, getting some good professional guidance, and executing a properly constructed 1031 exchange, all or most of those taxes can be deferred. The deferral through Section 1031 can be performed repeatedly from property to property for over a number of years until the investor decides to “cash out” and pay the taxes due, or passes away leaving their real estate to heirs who will receive a stepped-up cost basis. Allowing one’s real estate to grow tax-deffered may be one of the last powerful wealth building strategies available to investors of any kind today.
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Trade Up 1031 is a nationally recognized leader in real estate investing and tax solutions regarding real estate. If you have any questions, or would like more information on 1031 exchanges, please call Josh Slaybaugh at Trade Up 1031 at 866-661-1031, or visit them online at
www.tradeup1031.com
