How To Avoid Paying Your Capital Gains Taxes
Property investors often mistakenly sell their investment property or business and wind up needing to pay Uncle Sam thousands of dollars in capital gains taxes. They may not be aware of the tax laws in effect that provide them with the opportunity to retain their capital gains taxes on the sale of their business or investment property.
This law defers and can even eradicate taxes you would normally have to pay if you were selling your property. However, the money you make from selling your property must be used exclusively to purchase a like-kind property that you also intend to use for business or investment purposes.
When you take advantage of the 1031 exchange laws, you can save a lot of money, thereby allowing you to leverage your equity by purchasing even more property (which may have not been possible without the added tax savings).
The 1031 Exchange provision has saved investors millions and millions of dollars, and it is well worth your time to explore the benefits of it for yourself. In order to reap those rewards, there are some specific procedures you need to follow.
Be sure that you select qualified intermediary (A.K.A. "Q.I.") with a solid track record and professional reputation. Dealing exclusively with doing 1031 exchanges, a Qualified Intermediary is an expert with the facilitation of such a deal.
Your Q.I. provides a written agreement to change the transfer from and outright sale to an "Exchange" then transfers your relinquished property (that you are selling) and takes that money and uses it to purchase your replacement property on your behalf.
In order to qualify for this exchange you must abide by the following rules:
1. Firstly, the investment property that you are replacing must have been used for investment purposes or use in a trade or business and must be "like-kind" (i.e. US real estate for other US real state).
2. 2nd, if you haven't yet done so, you must clearly identify your replacement property in writing to your QI it within forty five days. You will need to close on the sale of your replacement property within the allotted 180 day timeframe.
3. To defer your capital gains taxes, all of the proceeds from the sale of the first property must be used to purchase your new replacement property.
Follow these 1031 rules and you will be in the best position to faciliate your exchange. The steps are very simple and even if the road along the way gets a little complicated, in the end it will put a big smile on your face. Do something good for yourself by retaining your capital gains with a 1031 Tax Exchange!
This law defers and can even eradicate taxes you would normally have to pay if you were selling your property. However, the money you make from selling your property must be used exclusively to purchase a like-kind property that you also intend to use for business or investment purposes.
When you take advantage of the 1031 exchange laws, you can save a lot of money, thereby allowing you to leverage your equity by purchasing even more property (which may have not been possible without the added tax savings).
The 1031 Exchange provision has saved investors millions and millions of dollars, and it is well worth your time to explore the benefits of it for yourself. In order to reap those rewards, there are some specific procedures you need to follow.
Be sure that you select qualified intermediary (A.K.A. "Q.I.") with a solid track record and professional reputation. Dealing exclusively with doing 1031 exchanges, a Qualified Intermediary is an expert with the facilitation of such a deal.
Your Q.I. provides a written agreement to change the transfer from and outright sale to an "Exchange" then transfers your relinquished property (that you are selling) and takes that money and uses it to purchase your replacement property on your behalf.
In order to qualify for this exchange you must abide by the following rules:
1. Firstly, the investment property that you are replacing must have been used for investment purposes or use in a trade or business and must be "like-kind" (i.e. US real estate for other US real state).
2. 2nd, if you haven't yet done so, you must clearly identify your replacement property in writing to your QI it within forty five days. You will need to close on the sale of your replacement property within the allotted 180 day timeframe.
3. To defer your capital gains taxes, all of the proceeds from the sale of the first property must be used to purchase your new replacement property.
Follow these 1031 rules and you will be in the best position to faciliate your exchange. The steps are very simple and even if the road along the way gets a little complicated, in the end it will put a big smile on your face. Do something good for yourself by retaining your capital gains with a 1031 Tax Exchange!
About the Author:
United States investors can save a lot of money by utilizing 1031 tax exchanges to defer all of their capital gains tax on the sale of investment property. A 1031 exchange is like an interest free loan from the U.S. Government.
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