A 1031 exchange is a way to defer taxes when selling a property and purchasing another. Real estate used for business or investment may qualify. When used properly, it can lead to dramatic savings. This article provides the benefits of 1031 tax deferred exchanges in Nashville.
Types of Properties that Qualify
You must have qualified real estate in order to consider a 1031 tax deferred exchange. Qualified real estate are those involved with a business or for investment purposes. It can include rental, land, residential, commercial, and industrial real estate. You must also intend to purchase a new similar property that also meets the qualification criteria.
Benefits Of 1031 Tax Deferred Exchanges In Nashville
Typically, when you sell an investment property, you pay capital gains taxes on the profits from the sale. This is true despite what you plan to do with that money earned. Taxes may be owed to the federal government and local state. Based on how long you kept a piece of real estate and how much equity you have in it, the taxes owed may amount to a large sum. A 1031 exchange gives you a means to put the earnings from one property directly into the purchase of another like-kind property and defer capital gains taxes until you sell that additional property. Of course, another 1031 exchange may be performed on that future property to delay taxes even further.
Preparing for a 1031 Exchange
There are different elements to a 1031 exchange that you should be aware of BEFORE marketing a property. 1031 Exchanges are not something that you can initiate after a sale is complete. You must plan to perform an exchange when you list qualified real estate for sale. Particular guidelines must be followed to conform to the exchange. This includes time frames for selecting and purchasing replacement property. A qualified intermediary must also be hired to manage the process. If a process is skipped, all potential savings will be void. Consult with a knowledgeable financial advisor for help with 1031 exchanges and to reap the benefits of 1031 tax deferred exchanges in Nashville.
Written by The Nashville Duo of Benchmark Realty