Chokov: How to Reduce Your Tax Bill With 1031 Exchanges

Posted by Alan Chokov, eFinance Portal of New Jersey, www.efpnj.com Real estate owners can easily reduce their tax bill by using 1031 exchanges. The 1031 exchanges also referred to as tax-free exchanges helps investors to trade in the real estate market with respect to purchasing property without paying taxes. However, there are certain rules and regulations that need to be followed in order to qualify for 1031 benefits. The main reason is to find out the need to go for tax-free exchange. There is a need to balance the benefits received at present to what might be receivable in the future for finding out whether the purchase or sale of property using tax-free exchanges is a good idea. Such an exchange only makes sense to an investor if they hold on to a certain real estate for a longer duration of time. With increase in value of the property, it might be necessary to sell the same for making profits. Through suitable depreciation in value due to these exchanges, it will be possible to save tax with an increase in the cash flow for the investor. It is possible to purchase the property at a lower rate after getting rid of the depreciation amount. 1031 exchanges can help you look at the possibility of getting hold of larger properties. Since larger properties are sold depending on the kind of cash flow they generate it might be a good idea to look at the possibility of tax savings while purchasing them. However, while attempting to secure a deal using 1031 exchanges it is important to complete the necessary paperwork in a proper manner. This is important since any sort of missing documents can lead to rejection of the deal under 1031 exchanges. Alan Chokov, Publisher - For more Real Estate News, go to the Home Page of www.eNJBusiness.com and click on the link. If you would like to contribute articles to our website, please Register. Receive News & Updates, and Free Email Alerts Relevant to New Jersey In Your Industry of Choice, please Register Here.