Benefits of 1031 Exchanges

1031 exchanges allow you to apply the profit from the sale of one qualified property to the purchase of another qualified property. By selling within a narrow window of time, you can defer taxes on the sale until a later date. This presents you with many benefits.

Value of New Property

If you were to immediately pay taxes on your sale, you would have a smaller amount of capital available to purchase your next investment. By forgoing tax payments for a period of time, you can afford more in the current year. This allows you to purchase an even larger investment than you purchased the first time. This is the route to growing your wealth through real estate investment.

Capital Gains Tax Rules

Real estate sales qualify for capital gains taxes. Capital gains tax rules use your current income bracket to determine the amount you will pay. It is most favorable to cash out a large capital investment when your tax bracket is the lowest. For this reason, many real estate investors continue to defer taxes through 1031 exchanges until they have retired and achieved a low tax bracket.

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