1031 Exchange Florida

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“Interested in upgrading your investment property? A 1031 exchange could be just the thing for you. Real estate investors in Florida can defer taxes on specific properties by exchanging them for similar ones. The 1031 exchange advantage applies to any property used for business, but vacation rental owners are trendy in Florida with this unique tax advantage.”

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1031 Exchange Florida

When owners sell their homes, 1031 exchanges allow them to defer capital gains taxes and reallocate that capital to more valuable properties. Understanding the rules and timelines for Florida 1031 exchange listings is essential to maximize this benefit. Here, you can learn about 1031 Exchange Florida and how to build an extensive real estate portfolio by deferring taxes.


1031 Exchange in Florida

Florida is a strong 1031 exchange market for real estate for investment or business purposes. With Attorney Real Estate Group, you can defer or avoid paying taxes on your income for decades. Whether you are a domestic or international citizen.

It is possible to defer tax on capital gains and recaptured depreciation taxes when purchasing a new property within 180 days of selling your old property, federally and, if applicable, stately.

The number of miles of coastline in Florida ranks second only to Alaska, followed by California, Hawaii, Louisiana, and Texas, making Florida a good location for 1031 exchanges. The Florida coast is a prime destination for 1031 exchanges because of the abundance of vacation rentals and investment properties.

Nearly a third of 1031 exchanges in Florida are reverse or improvement exchanges for vacation rentals, including single-family homes and condominiums. Our clients, attorneys, CPAs, title companies, realtors, and other qualified intermediaries refer us to them. With an average sales price of less than $400,000, most Florida 1031 exchanges allow for individuals, married couples, and trusts.


A Certified Exchange Specialist

As a certified exchange specialist on staff, we provide qualified intermediary services for 1031 exchanges to professional advisers and their clients. We have offices in Naples and Orlando, Florida, where we conduct most like-kind exchanges.

By following FIRPTA requirements when selling real estate. Foreign investors and companies can also defer US federal capital gains taxes. Our professional attorneys have extensive experience with FIRPTA filings, assisting professionals and title companies with the necessary documents.


Like-Kind Exchanges: What Are They?

Suppose Florida investors are going to exchange their home for another home. The replacement property must meet specific criteria. It is necessary to hold both properties for use in a trade or business or for investment, and they must be similar enough to qualify as “Like-Kind.”

Florida properties that qualify for 1031 exchanges are considered “Like-Kind” properties and include:

  • Apartments with multiple units
  • The healthcare industry
  • Facility for self-storage
  • Centers for detail
  • Warehouses for industrial use
  • Housing for students
  • Gas and oil
  • Agribusiness/Farming


What Is The Process Of A Florida 1031 Exchange?

An investor in Florida real estate can defer paying federal capital gains taxes. That would usually be due upon selling a property when they reinvest the profits into a comparable. Similar-type property that is the same or more excellent value after sale.

In the context of like-kind properties, the nature or character of the properties must be similar. However, it does not consider the grade or quality of the properties involved.


Leveraging their cash and increasing their purchasing power,

Besides deferring capital gains taxes, 1031 exchanges also provide investors with a variety of other benefits, including leveraging their cash and increasing their purchasing power, consolidating or diversifying their portfolios, moving their investments, and reducing management costs and duties by switching from properties that require high levels of maintenance to those that require low levels of maintenance.


Boost Your Cash Flow

A 1031 exchange begins with identifying the property you want to sell, also known as the relinquished property or down leg. When you sell that property, the proceeds go into escrow with a qualified intermediary. You are, therefore, exempt from paying capital gains taxes immediately when the proceeds leave your bank account.

With the proceeds from the sale of the downleg property, you can identify which property or properties you would like to purchase (called the upleg) with your downleg sale proceeds.

You do not have to pay capital gains taxes on the sale of the downleg property if the total value of the upleg property is greater than the value of your downleg and if you complete the exchange within the specified time limits.


The exchange within the deadlines

If the sale proceeds ever arrive in your bank account or are identified with your name, or if you fail to complete the exchange within the deadlines, you will be taxed. The Starker vs. Starker case from 1979 is often used to describe this type of exchange. Upon the ruling of a US court, property ownership transfers within a set time frame constitute the same as property exchanges coinciding.


Structures of 1031 Exchanges in Florida


Structures of 1031 Exchanges in Florida


Simultaneously, swap one property for another.

It is essential to understand that a Section 1031 exchange must involve the exchange of properties. The simplest way to accomplish this is to simultaneously swap one property for another.


Level of complexity in deferred exchanges

There is a higher level of complexity in deferred exchanges, but they provide more flexibility. You can dispose of the property and then buy a replacement property.

To qualify as a Section 1031 exchange, it must differ from a taxable transaction in which a taxpayer sells one property and then buys another with the proceeds. A deferred exchange requires that the relinquished and the replacement property be mutually dependent components of one integrated transaction. Income Tax Regulations provide rules for taxpayers engaging in deferred exchanges, such as using exchange facilitators.


Reverse exchanges require acquiring replacement.

Reverse exchanges require acquiring replacement property through an exchange accommodation titleholder, with whom the property remains for at least 180 days. Reverse exchanges are more complex than deferred exchanges. The taxpayer disposed of its relinquished property during this parking period to close the exchange.


Florida 1031 Exchange – What You Need To Know?

By acquiring new real estate, a real estate seller can defer taxes. Providing the Internal Revenue Service follows the proper procedures, the transaction will be considered an exchange of one property for another, not a sale and purchase. By recognizing the exchange as an exchange, the seller can defer paying taxes such as capital gains, depreciation recapture, and net investment tax.

To complete a forward 1031 exchange, you must follow seven simple steps:


Tax Advisor:

Whether an exchange is appropriate will depend on whether the exchanger (the individual or business selling the property) consults with a tax advisor to determine the seller’s tax liability upon selling.

Gain 1031 Exchange Company will prepare the exchange documents with the Title Company or attorney upon closing the relinquished property.


An exchanger and the title company closer:

An exchanger and the title company closer will sign the exchange documents at or before the closing of the relinquished property, and the exchange proceeds will remain in Gain 1031’s escrow account. The exchanger must have an exchange agreement before closing on the relinquished property.


The exchanger notifies Gain:

The exchanger notifies Gain 1031 in writing within 45 days of closing the relinquished property of the replacement property to be acquired (using Gain 1031 forms).


Exchangers contact Gain 1031:

Exchangers should contact Gain 1031 when their replacement property (ies) is closing.


Closing on the relinquished property:

The exchanger closes on the replacement property (ies) within 180 days (or less if the tax return due date falls within 180 days or if an extension applies). Gain 1031 will prepare the documents and funds wired to the Title Company or attorney closer by Gain 1031.


Receive tax deferral benefits:

Exchangers report the exchange on their tax returns and receive tax deferral benefits.


What Types Of Properties Qualify For 1031 Exchanges?

A 1031 exchange is available for any property used solely for business purposes. It is possible to maximize capital gains taxes on residential sales. Still, the IRS does not allow exchanges for primary residences, and there are specific rules to exclude them from exchanges. In the following paragraphs, you’ll find an overview of the types of properties you may be eligible for:

  • Property related to agriculture
  • Property for commercial use
  • Properties with conservation value
  • Rental properties for vacations

Investments in agricultural properties include farms and ranches. Investors can acquire and sell agricultural land at a higher price without paying taxes. When the new property is finally taxed when resold, they will have a higher chance of earning a positive return on investment if they reinvest those savings into a more profitable area.

The most common commercial properties for 1031 exchanges are shopping malls, industrial areas, and recreational properties.

A vacation rental not used as a primary residence is eligible for a 1031 exchange. Investors must adhere to specific IRS rules if they plan to use 1031 exchange vacation homes personally, including not spending more than 14 nights or 10% of their annual rental days.


Time Limits and Rules for Florida 1031 Exchanges

Florida 1031 exchanges must follow several rules:


It must be a “like-kind property.”

As mentioned above, a like-kind property refers to a property with a similar nature or character to the property exchanged. Initially, 1031 exchanges relied on swapping one property for another. However, that proved difficult to execute since it is difficult to find a property owner who wants your property simultaneously as someone who wants to buy your relinquished property.

For example, Section 1031 used to apply to a broader range of types of real estate and personal property items, including:

  • Art,
  • Franchises,
  • Equipment,
  • Partnership interests,
  • Stock in trade,
  • Securities,
  • Trust certificates,
  • And beneficial interests.


Exchanging business or investment properties

Starting January 1, 2018, exchanging business or investment properties was only possible. It is not possible to exchange personal property or a primary residence.

Many rental properties are available, including:

  • Apartment buildings,
  • Duplexes,
  • Single-family rental properties,
  • Commercial office buildings,
  • Vacation homes,
  • And restaurants.

It is possible to exchange Florida investment properties for properties elsewhere in the country, but you must have both in the United States.

The exchange can involve multiple properties. It is possible to exchange one or more of your properties in exchange for another. For example, you could exchange three single-family homes for a large apartment complex.


It must be of great value or equal to it.

To defer capital gains tax on sale proceeds, the money must be invested in properties of equal or more excellent value. However, inspection and broker fees can factor into the upleg property’s cost.


The taxpayer’s name must match.

Both the downleg sale and the upleg purchase papers must have your same name for a 1031 exchange to be successful. If you sell your property using a single-member LLC but purchase the new property under your name, this rule does not apply.


Make Sure You Don’t Forget “The Boot”

Nevertheless, you must pay capital gains tax on the difference between the replacement property and the down leg. It is the boot if the replacement property or property is less than the down leg. Taxes on the boot of $250k would be due if you sold a property worth $1 million and purchased two properties worth $750,000. Capital gains tax rates differ according to your income bracket: 0%, 15%, or 20%.


Exchange of 1031s: Timing Rules

A 45-day period follows the closing of the sale of your property to identify potential replacement properties. After it closes, purchasing your replacement home will take 180 days.

Proceeds from the sale of your property must remain in escrow until they can go to the purchase of the upleg property by a qualified intermediary. As a result, you do not get taxed immediately because the money does not go into your account. The QI handles the money and ensures that every party involved keeps their end of the deal.


A Step-By-Step Guide to Completing a Florida 1031 Exchange

Ensure that a 1031 exchange suits you by consulting your tax and financial advisors before selling your property.


Identify a qualified intermediary (QI)

Before closing escrow, select a QI who will hold your exchange proceeds. Don’t take receipt of funds – all proceeds must go to the QI, or the 1031 will be invalid.


Choose a Replacement Property

As soon as you relinquish the property, you must identify a replacement property to close on the relinquished property.

To take advantage of tax deferral, Corcapa 1031 Advisors offers a 1031 DST Solution that focuses on locating like-kind replacement properties for the same value or more significant.


Get Out Of Debt or Get In?

As a rule of thumb, the IRS requires that the debt on the relinquished property match the debt on the replacement property that is equal or greater.

You don’t have to buy a house with debt if you don’t want to. Despite the risk of debt, it can increase depreciable basis and shelter some cash flow from taxes for real estate owners.


Payment & Processing

We prepare your purchase documents and send them to you for signature after you select your replacement property. Lastly, sign documents releasing your DST escrow account proceeds with your QI.


Distribution Of Receives

When the replacement property closes, you will receive monthly cash flow distributions by direct deposit into your bank account.


Qualified Intermediary in Florida

You might be considering a 1031 exchange in Florida but need an experienced and trustworthy Qualified Intermediary. Attorney Real Estate Group offers accommodation services under Section 1031 of the Internal Revenue Code.

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