How Do I Fully Defer the Tax on the Sale of My Property through a 1031 Exchange?
There are a few aspects of a 1031 exchange that must be present for you to completely defer taxes on all proceeds from the sale of the current property.
First, you must find a new, or replacement, property with a value that is equal to or greater than the value of the current property to be sold so that all proceeds must be reinvested into the new property.
Second, you must reinvest all net income from the sale of the current property into the new property. You cannot have any income left over as this would become the "boot" and be taxable.
The general rule is that any tax on income from the sale of property in a 1031 exchange will be deferred, as long as the property owner does not receive any cash (or other non-"like-kind" property) from the sale of the current property.
- What Is a 1031 Exchange?
- How Do I Complete a 1031 Exchange Application?
- How Do I Choose a Qualified Intermediary for a 1031 Exchange?
- What Type of Property Can I Swap in a 1031 Exchange?
- What Are Some Advantages Provided by a 1031 Exchange?
- What Is the Timeline for a 1031 Exchange Application?
- How Can I Use a 1031 Exchange to Stop Managing Property?
- How Can I Take Advantage of a 1031 Exchange?
- How Long Do I Have to Complete a 1031 Exchange?
- What Is "Like-Kind" Property in a 1031 Exchange?
- What Is the "Boot" in a 1031 exchange?
- What Is a Delayed 1031 Exchange?
- What Is a Reverse 1031 Exchange?
- Do I Need an Intermediary for a 1031 Exchange?