"First, as real estate prices rise nationwide, we have large capital appreciation, and a greater need to preserve this wealth. And second, the capital gains tax rates have increased this year for some tax brackets, making the tax bite even larger"
Austin, Texas (PRWEB) June 13, 2013
A little known law in the tax code is gaining in popularity as owners of rental property, or income producing commercial real estate, discover methods to save on capital gains taxes. The 1031 exchange, named for that section of the tax code, is a way for these prudent investors to defer the tax that they would have to pay on the profit that they have made from owning a property. Instead, the investor can opt to purchase a new property, from the entire proceeds of the sale of the property they just sold, and not pay these taxes until the newly purchased property is sold at some point in the future. Theoretically, an investor can keep doing 1031 exchanges, and never pay tax on the sale of their property!
"The reason 1031 exchanges are becoming popular is twofold," explains Vik Vad, a real estate broker that specializes in investment properties. "First, as real estate prices rise nationwide, we have large capital appreciation, and a greater need to preserve this wealth. And second, the capital gains tax rates have increased this year for some tax brackets, making the tax bite even larger than before."
Mr. Vad plans to conduct a seminar later this month to explain the details of these exchanges, how they can be properly planned and executed, and to answer any questions about them. Because this is an obscure topic, and there is a great deal of misinformation, he feels that educating the public, whether an owner of a small rental condo, or a holder of a portfolio of investment real estate, is important. "A 1031 exchange may not be right for everyone, and there is an array of details that must be followed exactly, or the whole exchange may be disqualified," he states. "Also, every situation is unique, and must be handled on an individual basis."
When explaining how to do a 1031 exchange, Vad first gathers information on his clients' goals, timeframes, needs and desires. Planning an exchange from beginning until completion allows for more optimal execution, time buffers for unforeseen delays, as well as ensuring a client benefits fully from the provisions provided in the law. It also allows the customer to become more familiar and comfortable with the process, as well as consult with other tax or financial planning professionals.
The seminar is free to anyone wishing to attend, and will be held on Wednesday, June 19th, at the offices of Cantera Real Estate, from 1pm – 5pm. The office is located at 3103 Bee Caves Rd., Suite 102, Austin, TX 78746. For more information, visit the 1031 Exchange Austin website.