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.
Normal appreciation can be determined by your CPA or accountant from the natural increase in the value of your property. Normal appreciation is currently taxed at a maximum rate of only 15%. If you are in a state with an income tax or state capital gains tax, your CPA might also determine the amount of state and 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.
The purchase agreement should also include a stipulation or clause stating that you want to complete a 1031 Exchange. In this clause, it acknowledges that the purchaser agrees to cooperate in the exchange. You have now laid the groundwork for the closing. For sample 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.
In summary, the first step is to work with your CPA or accountant to determine what the capital gains tax will be (including depreciation recapture and state and local taxes.) At this point, you will decide if the 1031 Exchange will be of benefit to you. A Qualified Intermediary can help you and your CPA or accountant realize the full potential of the 1031 Exchange process. The next step is to 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.
If you have all of these things done, you can start the processes of deferring taxes and keeping your money working for you. - 23212
Normal appreciation can be determined by your CPA or accountant from the natural increase in the value of your property. Normal appreciation is currently taxed at a maximum rate of only 15%. If you are in a state with an income tax or state capital gains tax, your CPA might also determine the amount of state and 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.
The purchase agreement should also include a stipulation or clause stating that you want to complete a 1031 Exchange. In this clause, it acknowledges that the purchaser agrees to cooperate in the exchange. You have now laid the groundwork for the closing. For sample 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.
In summary, the first step is to work with your CPA or accountant to determine what the capital gains tax will be (including depreciation recapture and state and local taxes.) At this point, you will decide if the 1031 Exchange will be of benefit to you. A Qualified Intermediary can help you and your CPA or accountant realize the full potential of the 1031 Exchange process. The next step is to 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.
If you have all of these things done, you can start the processes of deferring taxes and keeping your money working for you. - 23212
About the Author:
U.S. investors can save a lot of money by using 1031 tax exchanges to defer all of their capital gains tax on the sale of investment property. A 1031 exchange is like an interest free loan from the U.S. Government.
posted by X - Men @ 4:27 AM
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