Real Estate Rookie Build Wealth Faster with This Tax “Loophole” (1031 Exchange) (Rookie Reply)
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Dec 13, 2024 Discover how to build wealth faster with a cleverly utilized tax strategy known as the 1031 exchange. Learn how to sell and reinvest in larger rental properties while deferring hefty capital gains taxes. Delve into the debate of whether to sell or rent a condo needing repairs, weighing potential returns and personal goals. Explore the decision of investing in renovations versus expanding your property portfolio, and uncover the financial benefits of smart property improvements to boost rental income!
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1031 Exchange Basics
- Use a 1031 exchange to defer capital gains taxes when selling an investment property.
- Ensure the replacement property is "like-kind," meaning a similar property type, not necessarily the same value.
Like-Kind Property Definition
- "Like-kind" in 1031 exchanges refers to the nature of the property (e.g., residential, commercial), not its price.
- A qualified intermediary is required to manage the exchange process and funds.
1031 Exchange Limitations
- Replacement property purchase prices in 1031 exchanges have limitations (200% of the original property's sale price; 95% rule may apply).
- Consult a qualified intermediary for specific rules and to facilitate the exchange.