1031 Exchanges in Southwest Florida: What You Need to Know
The 1031 Exchange Florida is a strategy permitted by the IRS, allowing real estate investors to trade one property for another without incurring capital gains taxes. You may come across it by another name, such as a like exchange or a Starker exchange. Some rules and qualifications need to be followed, but the Florida 1031 Exchange could be a great solution if you want to upgrade properties.
A 1031 Fort Myers Exchange means the same thing. The tool can be applied throughout the country. It comes from the pivotal 1979 Starker vs. United State court ruling where it was determined properties could be exchanged in a set amount of time and still be viewed under the law as a simultaneous shift of ownership – and eligible for the same tax relief benefits. If you sell a property now intending to buy another one, you will have to pay capital gains taxes. The 1031 Exchange Florida statute of the IRS allows you to use more money towards purchasing a new property instead.
How It Works
The 1031 Exchange Florida allows a real estate owner to “swap it out” for another and defer payment of capital gains taxes. The property you are buying must be a “like-kind” property – meaning it is similar to the one you sell. If there is no money left over from selling the original property, you own no capital gains taxes because you have made no profit. Many real estate investors use a 1031 Fort Myers Exchange to update their properties in this way.
The first step in executing a Florida 1031 Exchange in Fort Myers is to identify the two properties – which to sell and which to buy. As of January 1, 2018, the “like-kind” rule took effect that limits what properties can be exchanged. It excludes primary homes and residences – only commercial and investment properties can be exchanged. However, vacation homes that have been rented out for 14 days in a year for two years will qualify – so long as you do not spend more than 14 days a year living in the property yourself. The time spent on upkeep and repairs at the vacation home does not count toward that 14-day limit.
The most common commercial and investment properties the IRS approves for the 1031 Exchange Florida statute are rental properties – duplexes, apartments, rented single-family homes – and commercial properties such as office buildings, strip malls, and restaurants. You can use the statute to exchange facilities in other parts of the country – many transplants use the 1031 Fort Myers to invest here where the market is hot and relinquish properties in less prosperous areas of the country. You can exchange multiple properties on either the buying or selling side – for example, by exchanging an apartment complex for several smaller rental homes.
Step two is to find a qualified intermediary to hold the money from selling the property you release in escrow. This is the only way the IRS will allow you to defer paying capital gains taxes. Many 1031 exchange companies in Florida are qualified intermediaries to hold the money until the process is complete. 1031 exchange companies in Florida are often CPAs, title companies, or real estate lawyers with the licensing and knowledge of facilitating the process.
The qualified intermediary handles most of the heavy lifting involved in the exchange. They sell your property for you, hold on to the money so that your capital gains taxes are deferred, buy the property that is replacing the old one, and then hand the deed over to you. The qualified intermediary will also likely handle all of the paperwork, including what needs to be given to the IRS. It’s essential to choose a qualified intermediary with extensive knowledge of commercial real estate, especially as it applies to a 1031 Fort Myers Exchange and South Florida.
Other Features Of A Florida 1031 Exchange To Keep In Mind
While a qualified intermediary is holding the money for you in escrow, there is a limit to how much time you have to complete your Florida 1031 Exchange. The two numbers to keep in mind are 45 and 180. Beginning with the day you sell the original property, you have 45 days to identify the property you intend to buy with the proceeds and 180 days to close on it.
If the value of the new property exceeds that of the old, you must pay capital gains taxes on the difference. The old property is referred to as the “downleg” and the new as the “boot.” Exchanging a smaller, less expensive property for a larger, potentially more lucrative investment may be a good strategy. Just remember to factor in the taxes you will owe.
Your Commercial Real Estate Strategy Gains The Edge When You Partner With Alec Salameh
The current market conditions make this an excellent time to make an exchange through the 1031 Fort Myers statute. Help from a seasoned residential and commercial real estate professional like Alec Samaleh is your best option for navigating the process. Many 1031 exchange companies in Florida can facilitate some of the requirements necessary. Still, Alec Salameh and his team of realtors have undergone additional training and licensing that makes them uniquely positioned to find and negotiate commercial real estate sales in Fort Myers – maximizing the potential of your tax deferment.
The 1031 Exchange Florida is a viable and valuable tool for moving forward in real estate investing. Find out more about it and properties that are worth making the exchange for by contacting us at alecsalameh.com.