The 1031 exchange has been in place since the 1920’s, but not many are aware of the benefits it offers. Las Vegas real estate owners already have numerous tax benefits to owning homes, and on top of that is the 1031 exchange. In this article, we will briefly look at what the exchange offers and why professionals use it to enhance portfolios.
What Is the 1031 Exchange?
The 1031 exchange, also known as a like-kind exchange or Starker, is an IRS code under Section 1031, where investors have the opportunity to swap investment properties. They can swap their own, higher-valued property for another, allowing capital gains taxes to be deferred.
Apart from being a section, 1031 has also now become a verb for professionals, for example; “Why don’t you 1031 your house for another?”
Proper use of 1031 can lead to no or limited tax liability on your part when exchanging properties.
Why Professionals Use It on Large Portfolios
Property prices are at an all-time high, especially luxury real estate in Las Vegas. IRS allows investors to exchange properties without cashing out and recognizing a capital gain, yet you get the benefit. Your investment continues to grow, while the tax gets differed.
IRS has imposed no limit on the frequency or times a 1031 can be implemented. When real estate agents swap a property, they help investors avoid a tax liability until they end up selling the asset. What they would end up paying in taxes can now be used to expand the portfolio further.
While most of the times property exchanges in Las Vegas are of ‘like’, but you can exchange apartments for lands, houses for buildings, and more. You can even exchange businesses, but there are numerous considerations to make in that case.
There are a lot of moving parts in a 1031 and attempting to swap based on the code alone needs extensive understanding of the topic. If you’re looking to swap and avoid tax in the process, give us a call and we’ll help you set it all up!
Disclaimer: There are numerous factors to consider in every investment, including real estate. The information provided above is just a matter of opinion and can change with time. It shouldn’t be construed as legal or tax advice; neither does the report constitute a financial promotion or investment advice. It is general information and before making any such decision, you should seek out licensed professionals and see all ends clearly.