1031 Exchange Hawaii

1031 Tax Deferred Exchanges

Maui is a popular choice for vacation and second home owners. Consequently, many real estate transactions on Maui involve 1031 tax exchanges.

What is a 1031 Exchange?

A 1031 tax deferred property exchange allows capital gains tax to be deferred when property owners reinvest the net proceeds from the sale of investment, rental, business, or vacation real estate into other like-kind properties. Real estate held for these purposes is called like-kind or 1031 property.

A section 1031 real estate exchange enables a property owner to sell one property and acquire another without paying capital gains tax on the transaction. Additionally, there is a 25% depreciation recapture, which can be significant for fully depreciated properties.

In a standard sale, property owners are taxed on any gains from the sale. With a section 1031 exchange, taxes and recapture are deferred indefinitely. Property owners may sell like-kind properties and defer taxes on the sale’s profits by meeting the requirements of the Internal Revenue Code (IRC) 1031 exchange. The purpose of the 1031 Exchange is to allow sellers to purchase replacement properties within a specified time period while deferring taxes.

Contact The Maui Real Estate Team today for assistance with buying or selling Maui properties as part of a 1031 exchange. Call 1-800-579-1525.