What is a 1031 Exchange?
A 1031 exchange lets real estate investors defer taxes, both capital gains and depreciation recapture, when they sell an investment property. To qualify for tax deferral, the investor must reinvest into a new investment property (hence the term “exchange”). The replacement must be “like-kind” property, and the replacement property should be of equal or greater value than the relinquished property.
- Tax-deferred reinvestment
- Like-kind property requirement
- Replacement property of equal or greater value
- Capital gains and depreciation deferral
- Must follow strict IRS timelines
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