Enjoying Your Retirement

Posted on: 21 August 2020

Real estate along with your ability to invest into the rental market is a great vehicle in which you can watch your investments grow, sell them, and have the ability to diversify them into multiple other investments. Over time, this provides you with the means to benefit from tax deductions on your rental income and capital gains and with a 1031 Exchange Delaware Statutory Trust service to grow your investing capacity even more. Here are some tips for you to use and benefit from a DST 1031 service in a rental property sales transaction. 

Protect Your Investment

When you own rental property as a real estate investor, you usually benefit from receiving rental income from your tenants, which you put toward property maintenance and debt costs, and all the leftovers go back to you. There is also the potential for capital gains on a rental property when you decide to sell the property on the real estate market. Normally any capital gains realized at the sale would be taxed as capital gains and you would lose out on a great deal of it to the IRS. 

Because you want to be able to use all your property's sales value and its capital gains to put toward other various rental properties or property investments, you can defer this tax payment with a 1031 Exchange program. The 1031 Exchange filing allows you to take the capital gains and invest them into one or more new property purchases. When you are buying another rental property, the like-kind exchange transaction protects you from paying the capital gains tax on your investment gains and maximizing your investment potential. 

Defer Capital Gains Taxes

For example, you sell your rental property with a capital gain of $50,000; instead of paying the tax rate percent (based on the current year's tax code), you can take the entire $50,000 and put it into one, two, or more new property purchases. Just be sure you take advantage of a 1031 DST, which will hold the title of your property, so when you sell it, the 1031 exchange protection will cover the transaction. Contact a 1031 DST service professional to help you make the arrangements for this.

In addition to setting up the 1031 DST, you also need to make sure you invest the capital gains into a like-kind property. This means that the property you invest the gains from needs to be a similar type of commercial or residential property. And the minimum is traditionally $100,000 for the property to be under the 1031 DST. Contact your 1031 DST professional for more details.