Tips on tax deferment for Real Estate-1031
Most of you probably know that you can get tax shelter
through owning houses. But do you know that once you sell your house, you will
pay ALOT of taxe for the profit you gain. It is called tax on capital gain. You can
pay up to 15% more tax than needed. That is not really fair when you already
pay so much tax on your income salary.
One cool thing you can do is to defer your tax is through
1031 tax-free exchange.
How do you do that? Easy. First, you make sure that the house you are
about to sell is a “rental property”. Get a roommate or rent your house/condo out
for few months (to be safe, make it 12 months). When you are ready to sell the house, make sure that you find a
bigger, better and more expensive house. After you sell your old house, you use that
money to pay for that bigger, better and more expensive house within 180 days
(6 months). Viola, you now don’t owe IRS any tax on capital gain on this transaction.
Remember your bigger, better and more expensive house also need to be a "rental property". For detail process please consult your accountant or email me. Good luck on your tax deduction.
