A 1031 exchange is a method for postponing taxes on the sale of one property by purchasing another. Real estate used for business or investment can qualify. When executed properly, it may result in significant savings. This article provides the benefits of 1031 exchanges in Haddonfield New Jersey.
Qualified Properties
You must possess a qualified property in order to consider a 1031 tax deferred exchange. Qualified real estate are ones used in a business/trade or for investment. They may be rental, land, residential, industrial, and commercial real estate. You must also expect to buy new similar real estate that is also qualified.
Benefits Of 1031 Exchanges In Haddonfield New Jersey
Usually, when you sell an investment property, capital gains taxes are due on earnings from the sale. This applies despite what the funds are used for afterwards. Taxes can be owed to the federal and state government. Depending on how many years you owned a piece of real estate and how much equity you have in it, the taxes due can be quite large. A 1031 exchange gives you a means to redirect the equity from one property towards buying another like-kind property and delay capital gains taxes until you sell that new property. Of course, another 1031 exchange may be possible on that future property to postpone taxes even further.
Considering a 1031 Exchange
There are many components to a 1031 exchange that you must be aware of BEFORE selling a qualified property. 1031 Exchanges can not be performed after a sale is complete. You must plan to complete an exchange when you list qualified real estate for sale. Very specific guidelines must be followed to complete the exchange. This includes deadlines for identifying and purchasing replacement property. A qualified intermediary must also be used to manage the exchange and funds. If a step or time frame is missed, all applicable tax savings will be forfeited. Speak with a knowledgeable attorney for assistance with on 1031 exchanges and to enjoy the full benefits of 1031 exchanges in Haddonfield New Jersey.
