Are there any types of property that I can’t use a 1031 Exchange for?

This question is quite common, especially because of significant changes made within the industry over the last couple of years as President Trump took office and his new tax laws went on the books, changing the industry dramatically, but it still has a simple answer. Since the beginning of 2018, 1031 exchanges can now only be used for business or investment real estate. If one has a piece of real estate, without regard to what kind it is, as long as one uses it for business or investment purposes, then he or she can 1031 exchange that property into the purchase of another investment property, but one cannot use 1031 exchanges to exchange securities, buy stocks and bonds, buy artwork or collectibles, sell business equipment to replace, or for any kind of inventory, as one was formerly able to do. Under the old tax law, business personal property exchanges were possible. Thus, the only type of property that you can use for a 1031 exchange now is real estate.

There have been significant changes to the 1031 exchange process, but the simple thing one needs to remember is, if one has real estate that he or she is using for business, investment, or rental purposes, he or she can still exchange it and defer paying capital gains taxes by reinvesting the proceeds into another property. And so, 1031 exchange is alive and well, although it looks a little different than it has in the past.

Another related question is what constitutes “like kind” for an exchange. That question is also simple to answer now as all real estate is like kind to all other real estate. This means that you can sell a rental house and buy land, or sell a ranch and buy an apartment complex.

If we can help you with a 1031 exchange or if you have questions, call us today at 888-508-1901 to get started or fill out our online contact form. You can also take a look at the videos on the WealthBuilder 1031 Exchange YouTube channel.