4 Common Misconceptions About 1031 Exchanges
A 1031 tax-deferred exchange is used by real estate investors when they want to defer paying capital gains on one investment property when almost immediately purchasing another like-kind property. There are many benefits to a 1031 exchange, and they’re much simpler than most people think. We will make it even simpler and cover four common misconceptions about 1031 exchanges!
Common Misconception #1. Tax-deferred doesn’t mean tax-free.
This is a big common misconception, and it’s wrong! A 1031 exchange does not mean tax-free gains. Instead, it allows you to postpone paying tax on gains earned from selling an investment property then using those funds to buy a similar property. In this context, a similar property is the same in nature or character. It means the new property has to have the same purpose as the last property. For example, you can sell farmland that you rent and use the proceeds to buy an apartment building. Both properties produce income, so they’re considered similar or like-kind.
2. I can do it by myself.
With anything related to real estate, you need a real estate professional to help you be successful! At Boise Turnkey Properties, we specialize in real estate investing and are investors ourselves, so we “walk the investment talk”! We’re uniquely positioned to guide new and seasoned investors on their 1031 exchange journey. We even go a step further to make this journey pain-free by partnering with a local 1031-exchange provider to ensure a stress-free process for our investor clients!
3. There’s only one type of 1031 exchange.
There are several types of 1031 exchanges ! The delayed 1031 exchange is the most common type and is called a 1031 exchange, but there are other types too. There’s a reverse 1031 exchange that allows the investor to buy the new property first, then sell the second property at a later date. There’s also a build-to-suit 1031 exchange used by real estate investors building a property or renovating a current property. Depending on your investing goals, your 1031 exchange type can be either of those. We can help you pick the right one for your investment property!
4. The titles can have different names.
This is wrong! This misconception is a crucial requirement if you want to receive the tax deferment! Whether a business or personal, the taxpayer needs to have the same name that’s buying the new property. To be even more specific, it does include spouses. If only one spouse was listed on the old property and the other spouse is added on the new property, it can disqualify the property.
Contact our team at Boise Turnkey Properties today if you’re a real estate investor looking to explore creative solutions to defer capital gains taxes. Call us today at (208) 957-0870, email us at corby@boiseturnkey.com, or fill out the form below. We would be honored to personally help you through the 1031 exchange process.
