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.

Tellus TIP:

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.