Tax incentives are one of the biggest benefits of investing in real estate, but that doesn’t mean the process of applying for them is easy. Ensuring that you maximize savings and make the most of your investment strategy is layered in complexity and requires intimate knowledge of local and state real estate and tax laws.
If you’re planning on selling an investment property in Florida in the future, it’s important to understand what a 1031 exchange is and how it can work in your favor.
The 411 on a 1031
A Section 1031 exchange, also known as a like-kind exchange, enables real estate investors to sell one type of property for another similar property that will be used for the same purpose. You can consider it like a property swap – you sell one, you get one – and when you do, you are able to defer the capital gains taxes you would otherwise have to pay on the sale.
Deferring your tax payment by enacting a 1031 allows your investment to grow tax-deferred until you decide to eventually sell your property for cash many years down the road. There is no limit to the number of 1031 exchanges an investor can do.
The benefit of delaying a real estate property sale by doing a like-kind swap is that by the time you do sell for cash, your tax payment could qualify under the more favorable long-term capital gains rate, rather than the short-term rate. It is important however to always consult with your tax and accounting advisor in order to determine if a 1031 exchange is right for you.
Looking to Sell an Investment Property in Miami?
The real estate market in Miami is competitive and lucrative. If you have plans to sell and reinvest in SoFla, get in touch with our team at the Law Offices of Alex D. Sirulnik, P.A.. We partner closely with investors and intermediaries to assist in the successful sale of your property.