New 1031 Tax Deferment Laws Have Arizona Real Estate Agents Smiling

No matter which direction you head in Arizona, progress and growth are certainly on the rise. For investors in the real estate world, Uncle Sam has become their new best friend. The 1031 tax deferment is just as it sounds. While the basics behind the deferment can be tricky, having a qualified individual help with this transaction can make it go smoothly.

• First and Most Importantly, to Qualify for the Deferment, the Property Being Sold or Bought Cannot be a Personal Residence.
• This Program is for Investment Property.

For example, if you owned a two family home and wanted to sell this property and buy a four family home, the IRS would allow you to “defer” the taxes it would normally collect on the sale of the two family home.

At the closing of investment property number one, a Qualified Intermediary will hold the proceeds that are left over from the transaction, excluding any mortgages, taxes and other expenses. This third party is significant in making this transaction work. The intermediary is the one who will structure, consult, guide and document the transaction from beginning to end. Now, at the end of sale number one, you need to have the four family home in line to be purchased.

This is Where the Arizona 1031 Deferment Makes a Difference.

Your total proceeds from sale number one will be totally put into investment property number two. Allowing you to go into a larger investment without necessarily spending more out of pocket. What makes this attractive is that you do not have to sell rental home for rental home. This deferment has some flexibility, therefore more options as to the property type for an eager investor.

As with any transaction, it is most important to find the individual qualified to orchestrate the necessary steps. They should understand and be able to fully explain what steps are involved so this way your future investment will bring more returns than the IRS sees on April 15. By Denise Wojcik