Since 1921, America’s landed class has enjoyed the benefits of tax breaks that allowed them to defer payment of capital gains taxes from the sale of property; specifically, investors may def paying taxes on their gains as long as they reinvest their profits into other properties within six-months – these are referred to as “1031 exchanges”). However, part of President Biden’s $1.9T spending package involves closing this exact loophole as it relates to profits exceeding $500k.
Naturally, people have found ways to exploit this benefit. The typical method of exploitations involves reinvesting proceeds through the “1031 exchange” until the owner dies, providing their heirs with tax-free gains (assuming estate tax isn’t triggered). President Biden’s $1.9T spending package will also close those loopholes; it’s estimated that this plan will generate $41B between 2020 and 2024.
Ultimately, these changes are designed to target the ultra-wealthy; for sales involving less than $500k in capital gains, you are free to continue taking advantage of 1031 exchanges.
At the Chernov Team we understand that knowledge is power, and knowledge of how the current administration is impacting tax breaks associated with real estate transactions is powerful knowledge indeed. At the Chernov Team we know that whoever comes to the table the most prepared leaves with the most, and the Chernov Team always leaves the table with the most.
