I belong to a mentor group of real estate agents from around Massachusetts. We’ve been meeting since 1993 (yes, that’s not a typo!) and we’ve long since gone beyond just helping each other with our business and are friends. We meet once a month, either in person or with our web cams. Today we met in person and had a wonderful guest, Lynne Bagby, a 1031 Tax Deferred Exchange specialist from Orexco.
A 1031 exchange allows you to sell a piece of real estate held for investment and purchase another “like kind” property and defer the payment of capital gains. The definition of “Like Kind” means any piece of real estate held for investment, so you don’t have to buy a condo if you sold a condo. This allows you to invest 100% of your equity from your original property into your replacement property. It’s a wonderful part of the tax code in my opinion.
We talked with Lynne about the uses of a 1031 Exchange. Many people think about it when they own a large commercial property, but even owners of a 2 family house that have rented out one apartment can use this tool to buy another property and defer capital gain taxes.
One of the recent changes to the rules is you can now do an exchange on a vacation home, as long as you owned the property for at least 2 years and for each of the years, you rented the property for market rent to someone else for at least 14 days and you only used the property yourself for not more than 14 days. Obviously, I’m simplifying the rule, so contact Lynne directly at 866-663-1031 to get the full scoop.