3 Benefits Of 1031 Exchange
Posted on: 29 August 2019
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Investments of any kind can be challenging. Not only do you need to find the money to actually invest, but you will also need to ride the physical, emotional, and financial roller coaster of these investment decisions. Thankfully, investing can be a bit easier with the help of a 1031 exchange. Basically, this involves exchanging one investment for another. With this guide, you will learn a few key benefits of a 1031 exchange.
Tax Benefits
One of the most important benefits of a 1031 exchange is the tax benefits. Of course, you may be wondering how exchanging one investment for another will help with your taxes.
As long as the investments meet specific guidelines to qualify, the 1031 exchange will allow you to exchange one investment for another to avoid paying capital gains taxes. This can save you a good amount of money, especially if your investments have been greatly profitable.
Once exchanged in this manner, your investments will continue to grow tax-deferred because there are no limits to how many times you can continue exchanging.
Increased Income
In some cases, a 1031 exchange can help increase your income. If you choose to exchange an investment that has not earned any interest or value over time for an investment that does have potential growth and value, you will be able to increase your income.
An example of this would be exchanging an ordinary piece of real estate for one that can generate income, such as a rental home or a commercial property.
A 1031 exchange can also help you tap into the equity of a property, which can then be used for other investments, whether that be investing the money back into the current property or purchasing other pieces of real estate or different types of investments.
Reduced Stress
Finally, a 1031 exchange can help reduce stress in numerous ways.
Dealing with the tax ramifications of owning and selling investments is stressful enough. However, by exchanging the investments to avoid capital gains taxes, you can prevent worry and excessive stress.
Also, if you own multiple rental properties, whether commercial or residential, you are most likely dealing with a great deal of stress in regards to maintenance, repairs, and management. By exchanging multiple properties for a single property with multiple units, such as an office complex or apartment building, you can reduce stress tremendously.
Investment help is available. This guide and the help of professionals will ensure you understand whether a 1031 exchange is right for your needs.