Save Money on Your Investments with a 1031 Exchange
This week we sat down with Brigitte Echave, co-founder of The 1031 Exchange Company to learn more about the 1031 exchange process. Brigitte was first introduced to the real estate industry working with First American Title. In 2017, Brigitte opened The 1031 Exchange Company to specialize in helping clients save on their taxes. While the company is based here in Phoenix, they can help your out of state investments. Here are just a few of the questions we asked Brigitte:
What is a 1031 Exchange?
A 1031 Exchange allows taxpayers to defer recognition of capital gains and related federal income tax liability on the exchange of certain types of property.
How Does the 1031 exchange process work?
When you sell your investments, the proceeds go to the exchange company instead of directly to the clients. The client can then find a new property that they have never owned and that they will not be living in to exchange for the previous property. Clients must replace the value of the home, not just the gain and are able to purchase 1 to multiple homes with the funds. Once the funds have gone to the exchange company, the new properties must be identified in the first 45 days and the entire process must be completed in 180 days.
If I have a vacation home or airbnb can I use a 1031 Exchange?
Yes, but it is not quite that simple. Prior to exchanging a vacation home, the IRS requires that you have rented it for two tax return periods. The property must be rented at market value to a non-relative, however, it only needs to be rented for 14 days during the year. The client and their relatives are required to limit their use of the property to no more than 14 days during the year, unless they are there to conduct repairs. There is no limit to how long an owner can occupy a property that are repairing.
To learn more about how you can save on taxes using a 1031 exchange, watch our video or contact us so we can get you in contact with Brigitte!