It’s almost impossible to watch the news on television or read any financial publication and not hear about the looming “fiscal cliff” facing America. Current tax law, unless modified by Congress and the President, calls for automatic tax increases coupled with spending cuts beginning in 2013.
In addition to higher taxes on those who make more than $250,000 a year, capital gains taxes are slated to increase significantly on January 1, 2013. These looming tax increases have created many concerns for real estate investors.
Fortunately, for investors selling investment real estate, there is a small window of opportunity in December to take advantage of the tax deferral benefits of a 1031 exchange. Investors can either fully defer capital gains taxes using a 1031 exchange, or they can set up a 1031 exchange in December. This provides investors the option to receive proceeds in 2013 – and still take advantage of either the lower 2012 capital gains tax rate, or the tax rate in place for 2013.
Jon Christianson, an outside tax attorney associated with API, Inc., discusses the strategy of giving real estate investors the benefits of either tax rate scenario in his article “When to Pay the Piper.” I encourage you to read it, and I welcome any questions you may have.