1031 Exchange Services
1031 Like-Kind Exchanges
American Guardian Title provides 1031 exchange services in Apollo Beach, Florida as well as Georgia, Tennessee, Virginia, and Maryland. Contact us today for more information.
Real estate investors who sell a property can sometimes take advantage of a section in the U.S. IRS’ tax code that allows them to defer capital gains or losses on the property. This is called a 1031 exchange, after the section of tax code that offers this benefit. In order to qualify for tax deferment, the property exchanged must be what the IRS calls “like-kind.”
According to the IRS, like-kind property is defined as follows:
“Like-kind property is property of the same nature, character or class. Quality or grade does not matter. Most real estate will be like-kind to other real estate. For example, real property that is improved with a residential rental house is like-kind to vacant land. One exception for real estate is that property within the United States is not like-kind to property outside of the United States. Also, improvements that are conveyed without land are not of like kind to land.”
Benefits of a 1031 Exchange
There are many benefits of a 1031 exchange in real estate investments.
Defer paying taxes. The main benefit of a 1031 exchange is that you can defer paying taxes on the profit from the sale of property by investing that profit into another real estate purchase. In a 1031 exchange the profit made on the sale is not accessible to the seller; it is held in an escrow account until the purchase of another property is made.
Defer paying for depreciation. As property wears down over time it loses some of its value. The depreciation would be a taxable amount unless it is carried over into the purchase of another property in a 1031 exchange.
Consolidate properties. If you’re having trouble managing all of your properties, especially if they are costly in maintenance, a 1031 exchange allows you to sell property and invest it in a different property that may be easier and less costly to manage.
Diversify your assets. A 1031 exchange allows you to purchase different types of properties so you don’t have to be pigeonholed into one type of investment.
How Can I Determine if a Real Estate Transaction Qualifies for a 1031 Exchange?
Most of the time, if the exchange consists of real estate for real estate, it will qualify for a 1031 exchange. But tax laws can be complicated. There are specific criteria that must be met in order to qualify, and making a mistake could mean that you pay taxes as well as fees. It is best to have an expert provide assistance in real estate transactions and advise you on how to take advantage of the 1031 tax exchange law.
Why Choose American Guardian Title?
Getting tax advice from a trusted advisor is always best in any real estate transaction. American Guardian Title provides a variety of services in the buying and selling of property. Our primary role is to provide title insurance and to conduct a title search to ensure that the seller has the legal right to sell the property.
In addition to an insurance provider, we can also advise you on tax laws such as the 1031 exchange. If you need advice on what type of property to look for in a 1031 exchange or if a specific property you’re considering would qualify, American Guardian Title can help. We can also serve as an escrow agent and qualified intermediary in the transition.
Contact us today to learn more about 1031 exchanges and the other real estate services we provide.