Real estate investors can take advantage of a lot of tax benefits. One of the most impressive tax deferment programs is the 1031 Exchange. In this program, you’ll be able to limit your tax exposure for a given year. You’ll also be able to acquire a new income-producing property, using the proceeds from a property you sell.
Here’s how it works. If you want to sell a rental property but you don’t want to pay taxes on the capital gains you’ve earned, you can put the money you make on the sale back into the market by purchasing a new property or even more than one new property. That allows you to defer those capital gains taxes because you’ve re-invested the proceeds.
Another benefit is that your portfolio grows. Maybe you’ll sell one single-family rental and buy a duplex or two condos. You can improve the quality and quantity without paying extra taxes. There are rules and timelines to follow, so get expert help.