Going To Sell Rental Property? Benefits Of Using A 1031 Exchange

Posted on: 29 July 2021

if you own a rental property and are planning to sell it, you should use a rental property 1031 tax exchange. Below are some benefits of doing this so you will know what to do when you start to sell your rental property. There is also information on what a rental property 1031 tax exchange is.

Rental Property 1031 Tax Exchange

If you plan to use the money that you make when you sell the rental property to invest the money into another property, a 1031 tax exchange should be used. The other property must be at least worth the same amount as the property that you sell, however. It can be of greater value also. 

What happens is the money that you make from the sale of your property is transferred to an intermediary instead of to you. The intermediary will then transfer the money from the sale of the rental property to you. Because of this, make sure you do research to ensure you hire a company that you can trust with your money. There are many services out that there that are reputable and will handle your money well. 

Benefits of Rental Property 1031 Tax Exchange

The main benefit of a rental property 1031 tax exchange is it will save you money. This is because if you do not use this tax exchange, you will have to pay money into capital gains taxes when you sell your rental property and then reinvest the money. 

Capital gains are the tax you would have to pay on your rental property when you sell it. How much tax you would have to pay will depend on the worth of the rental property, but it can be expensive.  

Another benefit of using this is it can save you a lot of time. This is because the service that you hire to handle the exchange for you will be qualified to do this and get the job done quickly. The fact that no capital gains are used makes the process go much quicker. 

This also means you will have the money in your pocket much faster so you can get started on your reinvestment. 

The 1031 tax exchange services company that you hire can give you much more information to help you understand how all this works. This can be helpful as it can relieve a lot of stress from you if you have a better understanding.