Choosing to invest in rental properties can be a wonderful way to create passive income, grow wealth, and keep your overall investment risk to a minimum. This rather impressive collection of benefits is made possible by a variety of incentive opportunities, such as the use of rental property 1031 tax delayed exchanges. If you are not yet familiar with this particular type of tax incentive and how it works, you will want to continue reading to learn more about how it can help you to get the most out of your rental property investment. 

Understanding The Basics

A 1031 tax delayed exchange is a tax incentive that is offered on the federal level for individuals who choose to invest in rental properties. This incentive is made possible through the IRS code 1031, hence the name of the program. In short, this tax incentive gives you the ability to delay federal tax debts that relate to your sale of a rental property, provided that you use these funds to invest in the purchase of a new rental property within a rather short period of time after completing the sale of your original property.

Exploring The Benefits

There are several benefits that come along with choosing to take advantage of rental property 1031 tax delayed exchanges. These benefits include:

• the ability to grow your wealth
• the ability to increase your overall monthly income
• the ability to increase your purchasing power when investing in subsequent properties

All of these benefits are made possible by the fact that you will have more cash on hand after the sale of your rental property since you are not required to immediately remit payment for federal taxes due on the profits that you make when selling this property. 

Navigating The Process

While the idea behind a 1031 tax delayed exchange may be a relatively simple one, navigating the process of putting this tax incentive to work for you can actually be a bit complex. This is because both the sale of your original property and the purchase of your new property must be timed perfectly to ensure you do not miss any of the deadlines associated with this incentive program. Consequently, it is almost always best to work with a professional tax service when implementing a tax delayed exchange in order to ensure the process goes smoothly and that you do not miss out on any of the benefits that this opportunity has to offer.

Contact a local rental property 1031 tax delayed exchange service near you to learn more.