Exchange to a Tax-Free State
Domestic migration typically accounts for the most significant fluctuations in state populations. Individuals move for many reasons, including climate, economy, and affordability. Based on recent trends, you might also believe tax policy is a factor in the decision. Nevada, Tennessee, Washington, Florida, Texas, are all income-tax-free states. Those same states showed top-10 population growth in 2019. At the same time, states with higher tax rates all lost the most residents: California, Illinois, New York, New Jersey, Connecticut, and Massachusetts all lost the highest number of residents. If you own investment property and are considering a move to a tax-friendlier state, have you also explored how a 1031 exchange can help you? The Internal Revenue Code provides taxpayers like you an opportunity to defer taxes on the sale of an investment property when purchasing like-kind real estate through a 1031 exchange. Exchange rules allow your replacement to be anywhere nationwide. Investors already find replacement properties in different markets to take advantage of economic cycles where a different location could have a higher perceived upside. Others are repositioning assets to areas that have a lower operating cost. Do not forget the opportunity to reduce tax liabilities as well. Following well established safe harbor rules of IRC 1031, including the hiring of an experienced Qualified Intermediary (QI) like Advantage Wealth Solutions Exchange, LLC can dramatically maintain and build wealth. Smart applications of regulations can further the advantages already provided by the tax code. A thoughtfully designed exchange could be your solution to flexibly creating a real estate portfolio while removing other tax burdens from the sale.