Hilton Head SC Real Estate

1031 Tax Exchanges

Many folks are interested in the obvious tax advantages that are available in a 1031 Tax Exchange for their Hilton Head SC real estate.

How does a 1031 work? Well if, for example, a few years ago you purchased home (we will call it "Home 1”) for $200,000. You now have a contract to sell Home 1 for $700,000. (Home 1 is your “Relinquished Property”.) With your basis in the property being $200,000 and your sales price being $700,000, upon the sale you would have capital gains in the amount of $500,000.

At the current maximum capital gains rate of 15%, you would normally owe The government $75,000 in capital gains taxes. However, because you are doing a tax deferred exchange, the law allows you to take that $75,000 and use it to purchase your next piece of investment property (your “Replacement Property”) and pay the taxes at some later date; provided, of course, that you meet all the requirements for executing the tax deferred exchange.

(Note: The result is even more dramatic if you have depreciated the property where your basis is less than the original $200,000 you invested in the property.)

We have the expertise and resources to help structure your property to qualify for a 1031 Tax Exchange. For additional information please visit IPIX1031.com, or contact us through our on-line reply form.