A Legal Way To Avoid Paying Taxes On Your Property Sale
The 1031 Exchange
Section 1031 Exchanges, which have become more popular since the mid-90s, allow investors to defer federal income and state taxes.
- By deferring the tax, you have more money available to invest in another property. In effect, you receive an interest free loan from the federal government, in the amount you would have paid in taxes.
- Any gain from depreciation recapture is postponed.
- You can acquire and dispose of properties to reallocate your investment portfolio without paying tax on any gain.