At Vento Tax & Wealth Management Group, tax-smart investing for our clients often includes various real estate strategies. Real estate investing offers potential tax benefits and contributes to a well-diversified investment portfolio. The strategy we deploy most often for clients is a 1031 Exchange—with or without a Delaware Statutory Trust (DST).
The Internal Revenue Code affords opportunities in Section 1031 to defer capital gains tax that can accompany the sale of business or investment property. This solution allows clients to exchange real property for like-kind real estate and use the proceeds to purchase replacement property. Your primary residence does not qualify as like-kind real estate, and other criteria must be met to receive 100 percent tax deferral. So, it’s important to work with a tax-smart wealth management advisor to implement this strategy.
Click read more about dealing with exchanges that straddle tax year.
A Delaware Statutory Trust allows multiple investors to share ownership in a piece of real estate or a portfolio of real estate properties. Used in conjunction with a 1031 Exchange, a DST can offer more options for identifying the qualified replacement property necessary to defer capital gains tax. DSTs can remove the stress of having to select a replacement property within the 45-day identification period required of a 1031 Exchange, and it transfers the burden of decision making from the investor to the Delaware Statutory Trust company.
Real estate investing requires working with an experienced, knowledgeable, and tax-smart advisor to determine if solutions like 1031 Exchanges and DSTs are a good fit for your unique situation.
Schedule a complimentary consultation to discuss if real estate investing should be a priority in your plan for financial independence.