Tax liabilities on the sale of the real estate property may be upto 35%, and even more than this under certain circumstances. The payment of income tax from the sale of real estate property considerably reduces your equity and cash position, which in turn impact overall ability to build your net worth by purchasing larger and more profitable investment properties. The 1031 exchange allows investor to sell one or more properties and defer the tax payment on his/her ordinary income, depreciation recapture or capital gain by one or more replacement or investment assets.
These days, many investors are making use of the 1031 exchange properties for a number of good reasons. These types of properties help them avail long term lease that becomes a source of stable income and equity growth. The best aspect of investing in exchange properties is that people can exchange non-income producing real estate for another real estate property that will not only generate income, but it will also help you defer tax. It means if you have bought a raw land, you can replace it with other lucrative business property that will generate huge income along with several tax benefits.
The 1031 exchange property is much popular investment option especially in the United States. People prefer investing their hard-earned money in exchange properties in order to build stable income and avoid different types of income taxes liable on the owners. Of late, prices for real estate investment products have heavily declined. Considering the increasing popularity of real estate properties, all leading banks are ready to provide you with huge amount of loans helping you buy real estate assets. Those of you, who are looking to invest money in the exchange properties, consult professionals who have good knowledge about 1031 tax-deferred exchanges to guide in the best possible manner.