A 1031 exchange is a powerful tax-deferral tool that allows real estate investors to reinvest the proceeds from the sale of an investment property into a new property without immediately paying capital gains taxes. Named after Section 1031 of the IRS code, this strategy is especially valuable in high-growth markets like Southwest Florida, where property values have risen sharply in recent years.
What is a 1031 exchange?
Under a 1031 exchange, investors can sell a property held for business or investment purposes and use the proceeds to purchase another “like-kind” property of equal or greater value. To qualify, you must work with a qualified intermediary, identify potential replacement properties within 45 days of closing on your original sale, and complete the purchase within 180 days. Only investment or business properties are eligible; your primary residence does not qualify.
Benefits for Southwest Florida investors
Southwest Florida’s booming real-estate market offers unique opportunities for investors seeking to upgrade or diversify their portfolios. A 1031 exchange lets you defer capital gains taxes, freeing up more capital to invest in higher-yield properties—whether you want to move from a single-family rental to a vacation condominium or exchange land for a multi-unit apartment building. With Coastal Home AI’s data-driven insights and local expertise, you can identify properties that align with your investment strategy.
Key considerations
Because 1031 exchanges are governed by strict IRS rules, it’s important to:
- Work with a qualified intermediary to hold your proceeds and facilitate the transaction.
- Identify up to three potential replacement properties within 45 days of your sale and complete the purchase within 180 days.
- Reinvest all proceeds (including any debt that was on the old property) into the new property to fully defer capital gains taxes.
- Consult a licensed real estate professional and tax advisor to ensure compliance.
Get expert help
1031 exchanges can be complex, but they don’t have to be overwhelming. Coastal Home AI offers AI-powered property valuations reviewed by licensed agents to help you evaluate your options, and our team can connect you with qualified intermediaries and tax professionals. If you’re considering a 1031 exchange in Fort Myers, Naples, Estero or Bonita Springs, reach out today to learn how we can help you maximize your investment potential.
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