Real Estate · 5 min read

1031 Exchange Tax Basics

A 1031 exchange allows certain real estate investors to defer capital gains taxes when selling one investment property and purchasing another qualifying property. It is commonly used by investors who want to grow or reposition a real estate portfolio.

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A 1031 exchange has strict rules and deadlines, so investors should work with a qualified intermediary, CPA, and real estate advisor.

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Important concepts include:

Like-kind property
Investment or business use
Qualified intermediary
Identification deadline
Exchange period
Replacement property
Debt replacement
Tax deferral
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A 1031 exchange does not eliminate tax permanently. It generally defers tax until a later taxable event.

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Because the rules are strict, investors should plan before selling the property.

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