Learning From A 1031 Exchange Company On How To Start Saving Money By Deferring Taxes
The decision to utilize the benefits of a 1031 Exchange can be determined with the help of your CPA or Accountant. They will determine for you how much taxes you would pay in selling your property outright. This determination will be based on your adjusted basis in your property and the normal capital gains liability that would occur. Your CPA will help you determine the amount of taxes that would be due to depreciation recapture, which is currently taxed at a maximum rate of 25%. This tax rate is higher than the portion attributed to depreciation.
Likewise, your CPA or accountant will determine how much of the gain relates to normal appreciation from the natural increase in the value of the property. This appreciation is currently taxed at a maximum rate of only 15%. Your CPA will also determine if any state income tax or capital gains tax would be incurred. This would also include municipal tax liability.
Once all of the tax liabilities have been determined, an informed decision can be made as to whether to sell the property outright or to utilize the benefits of a 1031 Exchange. Typically, the cost of doing a 1031 Exchange is far less than the tax bill if you just sold the property outright.
The first step in taking advantage of a 1031 Exchange is to contact a Qualified Intermediary. The Qualified Intermediary will advise you of the need for a written purchase agreement signed by you as the seller and your purchaser. This agreement establishes your desire to sell your relinquished property as part of a 1031 Exchange.
It is a good idea to stipulate in your purchase agreement your desire to utilize the 1031 Exchange option. You have established that the purchaser agrees to cooperate with the 1031 Exchange. Also, you have established the groundwork for the closing. For an example of the cooperation clause go to www.1031podcast.com.
At the closing, the sale will become complete. The deed crosses the desk to the purchaser, and the net sales proceeds are paid directly to the Qualified Intermediary. This starts the 1031 countdown. The day after the closing is considered "day one" in the forty-five day identification period. During the forty-five days, you must identify in writing the property that you want to purchase as your replacement property. This "day one" is also the start of the 180 day exchange period that you have to complete the 1031 exchange and acquire your replacement property.
To sum up, from the beginning the you should first determine what capital gains tax bill (including deprecation recapture and state and local taxes) would be with your CPA or accountant, and decide if doing a 1031 Exchange will benefit you. Next, you should document your intent to sell the property to your purchaser, as well as your desire to complete a 1031 exchange by inserting text in your purchase agreement and contacting a qualified intermediary early - before closing on the sale of your relinquished property.
If you have all of these things done, you can start the processes of deferring taxes and keeping your money working for you. - 23226
Likewise, your CPA or accountant will determine how much of the gain relates to normal appreciation from the natural increase in the value of the property. This appreciation is currently taxed at a maximum rate of only 15%. Your CPA will also determine if any state income tax or capital gains tax would be incurred. This would also include municipal tax liability.
Once all of the tax liabilities have been determined, an informed decision can be made as to whether to sell the property outright or to utilize the benefits of a 1031 Exchange. Typically, the cost of doing a 1031 Exchange is far less than the tax bill if you just sold the property outright.
The first step in taking advantage of a 1031 Exchange is to contact a Qualified Intermediary. The Qualified Intermediary will advise you of the need for a written purchase agreement signed by you as the seller and your purchaser. This agreement establishes your desire to sell your relinquished property as part of a 1031 Exchange.
It is a good idea to stipulate in your purchase agreement your desire to utilize the 1031 Exchange option. You have established that the purchaser agrees to cooperate with the 1031 Exchange. Also, you have established the groundwork for the closing. For an example of the cooperation clause go to www.1031podcast.com.
At the closing, the sale will become complete. The deed crosses the desk to the purchaser, and the net sales proceeds are paid directly to the Qualified Intermediary. This starts the 1031 countdown. The day after the closing is considered "day one" in the forty-five day identification period. During the forty-five days, you must identify in writing the property that you want to purchase as your replacement property. This "day one" is also the start of the 180 day exchange period that you have to complete the 1031 exchange and acquire your replacement property.
To sum up, from the beginning the you should first determine what capital gains tax bill (including deprecation recapture and state and local taxes) would be with your CPA or accountant, and decide if doing a 1031 Exchange will benefit you. Next, you should document your intent to sell the property to your purchaser, as well as your desire to complete a 1031 exchange by inserting text in your purchase agreement and contacting a qualified intermediary early - before closing on the sale of your relinquished property.
If you have all of these things done, you can start the processes of deferring taxes and keeping your money working for you. - 23226
About the Author:
United States investors can save a lot of money by using a 1031 exchange to defer all of their capital gains tax on the sale of investment property. A 1031 tax exchange is similar to an interest free loan from Uncle Sam.
posted by X - Men @ 4:26 AM
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