The main reason for a 1031 Tax deferred Exchange: Paying less in Taxes.

The main benefit of buying Investment Property has been discussed. Taking a depreciation deduction on your tax return is a great way to save on paying taxes.

However, that accumulated depreciation write-off is not a gift from the IRS. When you sell that property, the IRS will want to collect on that write-off by taxing the accumulated depreciation as a Capital Gain. This example demonstrates what a capital gains tax looks like and the power of a 1031 tax deferred exchange. Rolling over proceeds from the sale of one investment property into another is a great way to buy, possibly, a better investment, but also to capture the full depreciation benefit on this new property and maybe even saving more on your taxes!

The process of a Tax Exchange can be complicated and there are strict rules and procedures that must be followed.

First and foremost, seek expert advice from a Qualified Intermediary. They will make sure that the steps involved in exchanging like-kind property is carried out to the rules and regulations set forth by the IRS.