What Qualifies for a 1031 Exchange?


What Qualifies for a 1031 Exchange?

The housing market is hot right now, so it’s a tempting time to sell your investment property that has appreciated in value. Is apprehension about paying taxes on those capital gains holding you back? Don’t fear, that’s where a 1031 exchange comes into play. A 1031 exchange allows you to defer taxes if you purchase a similar asset, such as another investment property, with the proceeds from the sale of your current property. What qualifies for a 1031 exchange?

Section 1031 of the Internal Revenue Code states that an exchange of “like-kind” property qualifies for this tax benefit. While this can initially be interpreted to mean a property that is comparable to the original investment property, it’s actually much looser in interpretation. It doesn’t even have to be the same type of property!

Investment properties that qualify for a 1031 exchange include land, rental buildings and owned buildings. These buildings can include houses, duplexes, apartment buildings, office buildings and more. Land included in a 1031 exchange can include bare lots or even farm land. The only stipulation of the 1031 exchange is that the land or property being sold and being purchased must be for business or investment purposes. A 1031 exchange does not cover personal property and residences, nor does it cover foreign property.

Are you ready to take the leap in selling your investment property for a new one? Are you ready to cash in on your capital gains? A 1031 exchange is right for you, but it is an intricate process that must be followed to the T to avoid costly capital gains taxes. The process must be started before the sale of your property, so reach out to us today. At Clear Title, our 1031 exchange experts are ready to guide you every step of the way with a 1031 exchange. To schedule a meeting with us, call (850) 202-8518 or visit ClearTitleNWFL.com.

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