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Section 1031 Exchange Process and How It Works For You as an Investor.
Just like there are taxes on the products that we use in our day to day life, there are property taxes that are levied directly . The truth is that these taxes can be a reason to worry for many property owners. As a property investor you want by all means to find a way around the chunk of tax that is hanging over your tax. Thanks to the 1031 exchange process taxes are something to look at lightly.
Some people will engage in property investments as a hobby but that is just business like any other to the IRS. With the 1031 exchange however you can sort that out, you are free to use any exchange provided under the section for properties that are strictly for investments. With some conditions you need to meet, vacation homes are an exception to personal homes that tend to be exchangeable. Property that is rental under the vacation properties exchange will need you to show at least six months or more of usage under that arrangement. Moving into the swapped property will take you an year after . If you would be interested to exchange your property , it can be quite a task to find a person who wants to do the same with a property that you are interested exactly and learn more.
With that factor in mind, the 1031 exchange process allows you to hold a delayed exchange, a third party will hold the money for the sale of the of the property to be swapped for a later date when the swap takes place. Make no mistake there are applicable taxes in a swap but you can defer them, forever if you like and that is music to the ears of many. Under the 1031 exchange process the size of the property matters a big deal, you need to make sure that the property you are swapping with is equal to yours or greater in cost because any money that remains is subject to tax and that inflates your tax bill.
Liabilities that you may have with your property are also determining factors in a 1031 exchange process, any mortgages and secured debts need to be equal or greater to those of the property that you are swapping with as well. You need to be careful not to be tempted to hold on the money for the property on sale through the exchange, not only will it attract penalties to you but it has the ability to void the entire exchange and you are back to the drawing board and view here for more. There are some personal properties that you can swap, you need to make sure that they are acceptable before you proceed and click here for more.