Inman

What is a 1031 exchange?

By April 20, 2017 No Comments
REPOSTED DIRECTLY FROM INMAN NEWS. THIS CONTENT HAS NOT BEEN MODERATED BY WFG NATIONAL TITLE.

In this video, Peter Lorimer of PLG Estates explains what a 1031 exchange is in real estate; 1031 refers to tax code. It means you can sell a property and not have to pay as much in taxes.

Backing up, there are some tax benefits to real estate. For example, if you are a married couple in the state of California, and you sell your prime residence that you have lived in for two of the past five years, you can have $500,000 tax free.

But what if you’re a real estate investor?

Let’s say you build a 10-unit building, and you own it for five years, but it’s not your primary residence. You bought it for $5 million, but you sold it for $6 million. You usually would pay taxes on that million-dollar profit.

However, with a 1031 exchange you roll that into the purchase of your next property. You exchange your property for a like kind property in a set amount of time without paying taxes. That’s the broad strokes of it. Of course, check with a CPA to verify the laws in your area.

The views and opinions of authors expressed in this publication do not necessarily state or reflect those of WFG National Title, its affiliated companies, or their respective management or personnel.

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