The biggest tax benefit allowed for real estate under tax laws
The best way to save money when purchasing real estate is categorize in two ways: one is the Tax Act 121, which exempts the capital gains from residential housing up to $500,000 for couples and $250,000 for singles, and the other is real estate 1031 exchange under the Tax Code 1031 that is explained here.

What tax benefits can I get from 1031?
In general, capital gains tax for the sale of investment property, as well as recapture tax for depreciation and Medicare tax for capital gains for high-income earners, must be paid in the year of sale. However, the benefits of the 1031 exchange do not require you to pay these taxes for the year, so you can buy a larger, more profitable sale by down 100% of the cash from the sale. Therefore, since it is the most effective tax provision for property growth, if anyone wants to sell investment real estate, it should be considered and used in depth. These 1031 exchanges are not one-time exchanges but can be used as a method of continuing to defer taxes through multiple exchanges throughout the lifetime. In addition, if real estate is inherited to a child through such exchange, under the current Obama tax law, the child inherits it at market price As a result, you don’t have to pay any taxes for any increase in the value of your assets so far, so you can enjoy the best benefits allowed by a permanent taxation law. However, this is subject to change due to the changes in the tax law in the Trump administration. Therefore, it is important to keep an eye on the changes in the tax law in the future.

If so, what is the 1031 Regulation?
For example, retention period, sale period, and type of property. First, there is a limit on the purchase period. In other words, a new property to be purchased must be selected within 45 days after the property is sold, and the purchase must be terminated within 135 days after that, so the total time should not exceed 180 days. Also, the use of real estate must be investment, rental, and business. In other words, investment properties purchased for personal use or for resale cannot benefit from these benefits. Therefore, to receive these 1031 tax benefits, it is important to have documents that clearly explain the intention that the purchase was not made for investment purposes for resale. The U.S. Tax Service does not stipulate that a property purchase must be held for a certain period to be considered an investment, but experts believe that it is safe to hold it for at least one year.

Is all real estate possible?
Under these regulations, appropriate real estate can be exchanged not only between rental property and rental property, but also rental property and land, commercial property, and residential apartment. However, the real estate excluded here is a disqualification for residential housing, second home, villa, and real estate purchased for development, resale real estate and real estate stocks, etc.

Can real estate in foreign countries do 1031?
These exchanges are not only possible with real estate in other states, but also real estate between other states is allowed. However, real estate in foreign countries and real estate in the United States cannot be exchanged. However, foreign real estate can be exchanged between foreign real estate.

Should I buy a property that is more expensive than the selling price?
This is not necessarily the case. Of course, if you want to avoid the full capital gains tax, you must buy more expensive items, but if not, partial exchange of 1031 is possible. In this case, you only must pay the capital gains tax allocated to this part by calculating the capital gains tax on the difference.

So, is it possible to save tax by exchanging all real estate subject to 1031 exchange for 1031?
It is not. In terms of tax savings, it is best not to exchange 1031 for real estate incurred by transfer loss, but to sell it and realize the loss in the current year. Also, when the tax income of the taxpayer is low, the tax rate is 10% or 15%. Taxpayers are entitled to a full exemption from capital gains tax obtained through the sale of real estate held for a long period of more than one year. In this case, it is not necessary to exchange it for 1031 to avoid the capital gains tax for the current year. For example, in 2017, if the tax income is less than $75,900 when the married couple is reported, capital gains tax is completely exempted, so it should be used well. However, it should be noted that tax income is calculated by including the amount of capital gains in tax income. In conclusion, I want to emphasize once again that “tax is the duty of the people, but since tax saving is the wisdom of the people, it is not only not necessary to pay more than the minimum tax required by law, but this is also not anti-patriotism.”