1031 Exchange Specialists,

A National Qualified Intermediary

 

Inc.

[1031 ESI]

 

Corporate Headquarters:
1155 Asbury Avenue
Ocean City
New Jersey 08226

Ocean City, NJ: 609-398-1031

Naples, FL: 877-513-1031

   Fax: 609-398-0500

Web: www.1031esi.com
Email: info@1031esi.com
Independently Owned and Operated
 
SERVICING ALL 50 STATES!
 
Your Tax Savings is Our Business! 
  1031 UPDATE

The principals of 1031 Exchange Specialists, Inc. have provided 1031 consulting services and documentation to real estate investors, their accountants and tax attorneys for over 21 years.  They have helped investors exchange over 8,500 properties, totaling more than 4.5 billion dollars of real estate, saving them vast sums of capital gains taxes.  The more significant changes to the 1031 exchange rules are summarized below.



The Tax Cuts and Jobs Act, H.R. 1 of 2017


Among the many modifications to the Internal Revenue Code under The Tax Cuts and Jobs Act, H.R. 1 (2017), 1031 exchanges are limited to real property held in the productive use in a trade or business or for investment.  Personal property, such as furniture, fixtures and equipment, will not be afforded 1031 exchange deferment after January 1, 2018.


 

Capital Gains Rates


Also, under The Tax Cuts and Jobs Act, H.R. 1 of 2017, long-term capital gains rates will continue to be tiered to income tax brackets. Capital gains rates of 0%, 15% and 20% will be applied based on individual tax brackets.  Individuals in the 10% and 12% income tax brackets will benefit from a zero long-term capital gains rate; individuals in the 22%, 24%, 32% and 35% income tax brackets will be subject to a 15% long-term capital gains rate; and individuals in the 37% top income tax bracket will be subject to a 20% long-term capital gains rate.  Property held for less than one year is subject to the ordinary income tax rates of 10% to 37% upon sale.  A Section 1031 Like-Kind exchange is a better alternative to paying taxes.


 

Net Investment Income Tax (NIT 3.8%)


Effective January 1, 2013, Section 1411 of the Internal Revenue Code applies a rate of 3.8% to the lesser of certain net investment income or adjusted gross income (AGI) of individuals, estates and trusts that have income above established threshold amounts.  A Section 1031 Like-Kind exchange will also defer Section 1411 taxes.


 

Qualifying Exchanges of Vacation Homes


Effective March 10, 2008, the IRS issued Revenue Procedure 2008-16 providing a safe harbor under which an exchange of a vacation home will not be challenged.  The highlights of this safe harbor are: (1) The taxpayer owns the relinquish and replacement properties for at least 24 months immediately before/after the exchange and; (a) The taxpayer does not use the property for pleasure more than 14 days per year (or 10% of rental period, whichever is greater) in each of the two years before/after the exchange (repairs and maintenance days do not count towards personal use days) and; (b) the property is rented to an unrelated party for at least 14 days per year in each of the two years before/after the exchange.  (Rentals to related parties are permitted if the related party utilizes the property as a principal residence and pays a fair market value rent.)  An exchange falling outside the parameters of this safe harbor may still be granted tax deferment under Section 1031 based on the taxpayer’s specific facts and circumstances.