Do you own one or more rental properties in the Central Valley that you’re planning on selling? If so, you may want to consider a 1031 exchange so you can defer paying taxes on the sale of the property.

Also known as a “like kind exchange”, a 1031 exchange is a perfect way for you to avoid paying capital gains taxes on the sale of your rental property if your property meets the requirements of the 1031 exchange.

What Are the Requirements?

For your property to meet the requirements of the 1031 exchange it must meet these requirements:

The primary 1031 exchange rules and requirements include: 1) same taxpayer: the taxpayer who sells is the taxpayer who buys, 2) property identification within 45 calendar days post-closing of the first property, 3) purchase of the replacement property within 180 calendar days, 4) trading up: the price of the replacement property is equal to or greater than the old or relinquished property, 5) hold time supports the intent to hold for investment, and 6) related party transaction regulations. 

Is A 1031 Exchange Right for You?

Warning: Special rules apply when the depreciable property is exchanged in 1031. It can trigger a gain known as “depreciation recapture” that is taxed as ordinary income. In general, if you swap one building for another building you can avoid this recapture. But if you exchange improved land with a building for unimproved land without a building, the depreciation you’ve previously claimed on the building will be recaptured as ordinary income.

Such complications are why you need professional help when you’re doing 1031. Still, if you’re considering a 1031 – or are just curious – here are 10 things you should know.

Get Property Management Here

For professional property management in the Central Valley contact RPM Central Valley today by calling us at (209) 572-2222 or click here to connect with us online.