Dreaming Big with Your Real-Estate Investing

It is easy to feel trapped if you have been doing something one way for a long time. Real-estate investing is no different. The prospect of moving to a new city or investing in a different kind of real-estate might seem beyond your reach. But if you utilize the proper tools your real-estate investing is limited only by your imagination.

One such tool is a 1031 exchange. A 1031 exchange lets you sell investment real-estate and defer capital gains taxes, giving you the opportunity to use your tax dollars for your benefit. If you are looking to move from one type of real-estate to another that is very much an option. And the best part is that the property that you exchange for can be located anywhere in the country.  A 1031 exchange gives you the opportunity to maximize your investing and broaden your portfolio.

How the New Tax Plan Affects 1031 Exchanges

A 1031 exchange is the go-to process for anyone looking to maximize their real estate investing and defer capital gains taxes. But how will president Trump’s new “Tax Cuts and Jobs Act of 2017” impact 1031 exchanges?

In the past, a 1031 exchange could be used to defer capital gains taxes on both real estate and personal property. If you had a house with a bunch of furniture inside you could exchange both the house and the furniture without encountering any capital gains taxes. Under this new bill, personal property can no longer be exchanged using the 1031 method. However, if you were already in the process of exchanging personal property and had closed on a sale or acquired replacement property before December 31, 2017, then you are free to finish the exchange in 2018.

While these changes will have a big effect on art collectors, real estate investors will come out on top. Those looking to utilize the power of a 1031 exchange on their real estate are still free to do so.

If you want to see what else is covered in the “Tax Cuts and Jobs Act of 2017” follow this link to read the full tax plan.

2018 Tax Plan is Drawing Northeastern Homebuyers to Florida

Florida has always enjoyed sunnier weather than the frozen Northeast. And after the 2018 tax plan, Northeasterners are noticing that the Sunshine State has a much friendlier property tax and no personal income tax. According to Business Insider, a resident from Massachusetts who would have had to pay over $14,000 in property and personal income tax can save almost $7,000 by relocating to Florida.

The expected influx of Northerners as a result of the tax changes follows the larger trend of homebuyers migrating south. To read more on that visit Homebuyers Heading South.

 

Multi-Member LLCs and 1031s?

When it comes to 1031s, it is all about whose name is on the original tax return. This goes for LLCs as well as individuals. Multi-member LLCs follow the same rules as everyone else. The name on the original tax return must be the name on the title of the replacement property. If an LLC is multi-member, they probably file taxes as a partnership. Each LLC can sell the property it owns and do a 1031 to buy a replacement property. If you find a replacement property that is big enough, then each LLC could sell and buy a % of the larger replacement as a tenant in common.

Example – each LLC owns a property that is worth $500,000. They could both sell and 1031 each into a 50% tenant in common interest of a property worth $1 million.

Once the LLCs have completed their exchanges, they could simply remain as tenants in common. Or could work with their accountants to dissolve one or both and leave the property in one LLC with the same membership interest allocation.