Section 1031 Like-Kind Exchanges allow an investor to defer (not eliminate) the capital gains on the sale of property. This special tax law enables owners of income properties to sell one property without paying capital gains at the time of sale as long as they purchase another similar investment property within a designated time period. Taxes can be paid in the future. Section 1031 dates back to 1921, when it was created specifically to boost income property investments. Why?

  • Capital gains taxes are often an obstacle to selling a property. The ability to defer capital gains enables more owners to sell income properties, including: homes, duplexes, apartments, commercial buildings, etc.
  • 1031 Exchangers can then reinvest in properties that are better suited to their needs, and release older properties to the market.
  • More properties on the market help to ease pricing.
  • New investors get an opportunity to join the market.
  • These new owners are likely incentivized to update their recent purchase.
  • Home and property improvement projects create jobs in the community.
  • Property updates boost local economies as owners pick out new hardware, furniture, windows, window dressings, HVAC, plumbing, roofing, etc.
  • Housing and commercial building improvements increase the value of the local neighborhood.
  • All of this helps your local community thrive.

Because of this, home ownership and investing has long been encouraged by tax laws. There is nothing that has as much stimulus effect on an economy as home purchases. Investment properties are an important component of the home ownership equation. 1031 Exchange is an important protection in our current tax laws. Please read about the proposed changes and let your state representative know your opinion.

If you are interested in purchasing an investment property on the mid-peninsula, or anywhere in the country, please let me know. I have a trusted network of connections and contacts that specifically help me and my clients with income properties around the nation.

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This post was written by Rumana Jabeen

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