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Real Estate Secrets: Understanding 1031 Exchange Rules Work And How You Can Save Money When Selling A Property

Did you know that you can still make more money from the property you are selling besides what the buyer is going to pay? It is called a 1031 exchange rules but there are requirements that need to be compiled before investors can avail of this advantage.

Before going further, what is 1031 exchange rules?

In section 1031 of the IRS tax code which allows investors to defer paying any capital gains taxes on the proceeds of the sale of real estate which is summed up as the 1031 exchange rules. This is if the profits are put towards the purchase of a “like-kind” property.

For a deeper understanding about 1031 exchange rules continue reading.

Get to know the 1031 exchange types to find the ones that suit you better.

On the deferred exchange, a property is sold first then another property is bought in its place after a particular amount of time, click here to learn more.

Reverse exchange is a replacement property is bought then the current property is sold afterward, view here for more info.

A simultaneous exchange happens when the property is immediately exchanged for another, find out more about it.

It must be taken into account that there are rules in 1031 exchange. Among of these is the prohibition of using the same exchange from the previous years and acting as your own facilitator.

What are the qualifications within the 1031 exchange rules?

In the terms of the 1031 exchange rules there is a limit to the properties that is three.

With a lot of investment you will be assured at least one goes through successfully. You can only stick to three potential properties that can be identified buy you must ensure that you close one of them.

It is not applicable to those who are selling their primary residences, it has to be an investment property.

You must remember that you still have to pay for the tax that is on the original profit and the gains for the new property. You can learn all about the ins and outs of 1031 exchange rules here.

The 1031 exchange rules can be complicated, that is why it is recommended to ask for tax associate to help you in the process. They would provide you with the necessary details about 1031 exchange rules and what you need to know.

Share this information with those who are planning to sell their own properties, maybe it can help them understand the 1031 exchange rules better.

You can learn more about ways to sell your real estate property.