How to prepare for a 1031 Exchange | How does a 1031 Exchange Works | Houston TX
Do you want to sell your current investment property to purchase another investment property?
Make sure you set it up as a 1031 exchange to avoid paying capital gains tax!
First and foremost, talk to your CPA! You will have to fill out Form 8824 to report each exchange of business or investment property for a property of like kind. Also note there are rules and timelines that you have to follow in order to gain the benefits of a 1031 Exchange.
Minimize your Tax Liability through a 1031 Exchange
The first thing is always hiring a professional realtor to sell your current property at top dollar!
After closing, the buyer transfers the purchase amount to your qualified intermediary to be held in escrow. Here in Houston, we would have to go through a title company. They will hold that money on your behalf until you close on your next property. You may not transfer this money into your personal account for any reason or else you won’t be able to apply for the 1031 exchange.
After closing, you have 45 days to identify the next investment property you will purchase. The property must be of at least equal value. Finally, you must transfer the money for your next purchase through your qualified intermediary to the new seller. Make sure you close within the next 180 days.
The process is not complicated, but it’s important to talk to the right people in order to avoid any capital gains taxes.
Ready to upgrade your investment property through a 1031 exchange? Our real estate team will point you in the right direction.
