A General Overview of Tax Reform and the 1031 Exchange


Tax reforms such as the 1031 exchange can benefit small business owners in a number of ways. A 1031 exchange is an example of a tax deferred exchange which is designed to allow you to sell a business property and then use the profits from that sale to purchase another property without owing taxes on the sale right away. With a 1031 exchange, investors can use their property to build wealth without incurring crippling tax consequences.

You may be wondering how a 1031 deferred exchange actually works? In a 1031 tax reform an investor can dispose of investment properties and use the equity that they have gained from these sales to purchase certain properties that qualify as 1031 replacement properties. This allows the investor to defer the capital gains taxes that the sale of the property would usually incur. By purchasing investment properties that are similar or 'of the same like and kind' the investment will actually be treated legally as a kind of continuation of the primary investment. This means that the taxes from the sale of the property will not be due until the replacement properties are sold.

It is easy to see how an investor can leverage their current investment properties into significant wealth through 1031 exchanges. But how can you be sure that your new investment will qualify for the tax deferred exchange status? The best way to figure out which properties will qualify as 1031 replace properties is to discuss your investment plans with an expert in the areas of tax reform and exchange business interest deductions.

Some people complain that the 1031 tax reform is only useful to large companies and wealthy investors. However, the truth is that small business owners can benefit from a 1031 business exchange. Even a local landlord can use the 1031 exchange to their own benefit by leveraging their current property into improved properties without incurring a hefty tax bill. Whether you are a big time investor or a local rental property owner, you should speak to a 1031 exchange intermediary to find out more about using the 1031 exchange.

If you are a small business owner and do not quite understand how the 1031 tax reform can work to the benefit of your small business, the best thing that you can do is seek the help of a 1031 exchange intermediary who has a direct understanding of how a 1031 exchange works. To find out more, all you have to do is perform an online search using your preferred search engine for information about tax reform measures that may help your small business. Find out more about taxes at https://en.wikipedia.org/wiki/Tax#Kinds_of_taxes.