The old switcheroo

Swapping for a higher priced property

Image courtesy of Stuart Miles at

Since today is the day after US income taxes are due, now is a good time to remember it is never too early to plan your tax strategy.  If you are investing in real estate you need a good CPA and to be familiar with section 1031 of the IRS code.

We are not tax professionals, so always consult your trusted CPA to provide the nitty gritty of the rules, but this opportunity applies to like kind exchanges of property.  Section 1031 allows you to postpone paying tax on the gain if you sell a property and reinvest the proceeds in a similar, higher priced property.  Remember, it is not tax free but tax deferred.

There are time limits on taking advantage of a 1031 exchange.  First, you must identify potential replacement properties within 45 days from the date you sell the relinquished property.  Second, the replacement property must be received and exchanged within a specified amount of time.

This is a great opportunity for a real estate investor to keep rolling proceeds forward into more expensive properties without immediate tax consequences.  Your net worth will soar!

Have you taken advantage of a 1031 exchange?  If so, please comment your experiences here!