The Associated Press has announced Biden as the President-Elect. With Biden comes his tax plans, including changes to the 1031 Exchange. With the potential changes to the 1031 Exchange, what can you expect for the oncoming years?
The Associated Press has announced Biden as the President-Elect. With Biden comes his tax plans, including changes to the 1031 Exchange. With the potential changes to the 1031 Exchange, what can you expect for the oncoming years?
1031 Exchange
IRS code Section 1031 has been a long time favorite for real estate investors that allows them to defer federal taxes on some real estate exchanges, hence the nickname 1031 Exchange or the like-kind exchange. Because of the deferment, those who use it to their advantage can build their portfolio with fewer tax burdens. Since 1921, this code has grown in popularity for the real estate industry as it’s specific to investment properties and not primary residences.
1031 Exchange
IRS code Section 1031 has been a long time favorite for real estate investors that allows them to defer federal taxes on some real estate exchanges, hence the nickname 1031 Exchange or the like-kind exchange. Because of the deferment, those who use it to their advantage can build their portfolio with fewer tax burdens. Since 1921, this code has grown in popularity for the real estate industry as it’s specific to investment properties and not primary residences.
What’s Coming Next
President-Elect Biden has given a clear warning to those in certain tax brackets about his plans. He will be focused on those who earn $400,000 a year and more. Anyone who does not meet this requirement should not be affected by his plan, which does imply that those with smaller portfolios may still be able to use the 1031 Exchange to their advantage. Basically, those under that line could still defer the tax payments on their property exchanges, while those make $400,001 annually could not.
Over $400K Annually
The focus of President-Elect Biden’s future tax changes, including affects of 1031 Exchange limitations.
Under $400K Annually
No to minimal changes.
Other Noteworthy Changes
The Pease Limitations may see a return for those in the tax bracket to limit itemized deductions
What’s Coming Next
President-Elect Biden has given a clear warning to those in certain tax brackets about his plans. He will be focused on those who earn $400,000 a year and more. Anyone who does not meet this requirement should not be affected by his plan, which does imply that those with smaller portfolios may still be able to use the 1031 Exchange to their advantage. Basically, those under that line could still defer the tax payments on their property exchanges, while those make $400,001 annually could not.
Over $400K Annually
The focus of President-Elect Biden’s future tax changes, including affects of 1031 Exchange limitations.
Under $400K Annually
No to minimal changes.
Other Noteworthy Changes
The Pease Limitations may see a return for those in the tax bracket to limit itemized deductions
Biden plans to raise around $3.3 trillion in taxes over the next ten years and limiting the use of the like-kind exchange is just the tip of the iceberg. Corporations that earn over $100 million a year in profit will face a minimum tax, sure, but it’s not all. Anyone who earns that $400K annually will have a few changes come their way. The Pease Limitations may see a return for those in the tax bracket to limit itemized deductions, as well as other turns focused on those who may be deemed wealthier and closer to the 1%.
Biden plans to raise around $3.3 trillion in taxes over the next ten years and limiting the use of the like-kind exchange is just the tip of the iceberg. Corporations that earn over $100 million a year in profit will face a minimum tax, sure, but it’s not all. Anyone who earns that $400K annually will have a few changes come their way. The Pease Limitations may see a return for those in the tax bracket to limit itemized deductions, as well as other turns focused on those who may be deemed wealthier and closer to the 1%.
None of these changes are right around the corner. Until the Senate lines have been drawn, we cannot guess as to what parts of his tax plans will actually pass. In the meantime, the best thing to do is to keep an ear out and an eye on the polls. You may even want to check with a financial advisor who could make more sense out of Biden’s future legal talks and his plans for your wallets.
None of these changes are right around the corner. Until the Senate lines have been drawn, we cannot guess as to what parts of his tax plans will actually pass. In the meantime, the best thing to do is to keep an ear out and an eye on the polls. You may even want to check with a financial advisor who could make more sense out of Biden’s future legal talks and his plans for your wallets.
2 Replies to “Biden Might End the 1031 Exchange: What You Should Keep Your Eye On”
Please stop with the political jabs on any one party or president. This is highly unprofessional and part of whats wrong with our country. We have a historically large national deficit that started years before the pandemic that no one seems to have noticed. A stable society is essential for landlords and business income. Stop using politics to divide our nation and our economy.
Thank you for your feedback on our article, Beverly. The information contained in this article is intended to inform based on what we know has been stated as changes the new administration intends to make, and will directly impact members of the rental housing industry.