Property tax is a tax that is imposed on real estate properties . It doesn’t have to be the case but the truth is that many property owners will worry about the taxes on their properties. As a property investor you want by all means to find a way around the chunk of tax that is hanging over your tax. With the 1031 exchange process in place, property investors can rest easy.
Property investment might be a hobby to you but to the IRS that’s taxable business. The 1031 exchange process allows you to use any of the exchange under the section for properties that are investment vehicles or those that are for business use. With some conditions you need to meet, vacation homes are an exception to personal homes that tend to be exchangeable. If the property was a rental you are required to show six months of rental usage as simple declaration will not cut it. 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.
This means that it may take some time before you can find a match to do he swap with, the 1031 exchange process allows for a delayed exchange where a third property holds the cash for sale of your property to purchase the replacement at another date. There are taxes in an exchange but the thing is that under the 1031 exchange process you can defer those taxes for as long as you want and eventually avoid them. 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.
To do 1031 exchange process , any liabilities and debts secured with your property need to be checked, like size of the property they need to be equal or greater to those of the property that is being swapped. You stand to have some heavy penalties if you handle the cash for the sale of a property under the exchange, it will void the exchange apart from attracting you penalties, you should use the services of a company that has specialized in 1031 exchange . You can exchange some personal properties but they need to be accepted by the IRS for the exchange to be approved so you can never be too sure.