Why 1031 Exchange If I Am Going To Have To Pay Taxes Eventually?
We are often asked: why perform a 1031 exchange if I’m going to have to pay taxes at some point?
This is not totally true. There are two ways that you can do a 1031 exchange and may NEVER have to pay taxes.
Convert to Primary Home
With careful planning, you could convert your 1031 exchange to your primary home. After two years of renting out a 1031 exchange property, you can convert it to your primary home.
Continue to 1031 Exchange for Life
Converting your investment property to your primary home may not interest you. In this case, there is another way to avoid ever paying taxes on 1031 exchange properties. You can use the strategy of doing exchange after exchange to defer taxes until your death. Then, when you die, all capital gains gained over the years of doing exchanges go away. This allows your heirs to inherit the property on a stepped-up basis. This means they inherit the property at the current fair market value.
Midland 1031 is not a fiduciary or financial advisor. As with any investment, you should consult with your CPA or tax advisor for more information.
Midland 1031 serves as a Qualified Intermediary (QI). We have two Certified Exchange Specialists® (CES®) on staff. We have performed exchanges for clients across the nation. Midland 1031 ensures your exchange is performed correctly.
With a 1031, you can exchange investment or business-use real estate to defer taxes. These taxes include capital gains, depreciation recapture, healthcare, and state taxes. These deals must be done well and with great attention to detail. This protects your investment and maintains compliance with industry rules and regulations. Midland 1031 works with you to make sure this happens.
For real estate investments in an IRA, contact Midland Trust. You can reach them at 239-333-1032, or visit the Midland Trust website.