How 1031 Exchange Works

A 1031 exchange is a valuable tax-deferral strategy. Here’s how it works:

A 1031 exchange is a valuable tax-deferral strategy for real estate investors in Washington and Oregon, allowing you to sell a property and reinvest the proceeds into another "like-kind" property without paying capital gains taxes immediately. Under Section 1031 of the U.S. Internal Revenue Code, this approach is ideal for investors seeking to grow their portfolios while minimizing tax liabilities.

Key Benefits of a 1031 Exchange in Washington & Oregon:

Tax Deferral:

When you sell a property and reinvest in another investment property within Washington or Oregon, you can defer paying federal capital gains taxes, keeping more capital working for you in your new investment.

Flexible Property Types:

Whether you own residential, commercial, or industrial real estate, you can exchange like-kind properties held for business or investment purposes. For example, you can exchange a rental home in Portland for a commercial building in Seattle.

Regional Growth Opportunities:

The Pacific Northwest, particularly Washington and Oregon, offers robust real estate markets. A 1031 exchange allows you to capitalize on the region's growing property values by reinvesting in larger or more lucrative properties without immediate tax consequences.

Important Considerations:

Strict Timelines:

The IRS mandates that you identify a replacement property within 45 days of selling your original property and complete the purchase within 180 days.

Qualified Intermediary Requirement:

To complete a 1031 exchange, you must use a qualified intermediary to manage the transaction. This ensures you don’t have direct access to the sale proceeds, maintaining compliance with IRS rules.

Washington and Oregon investors also have the option of improvement exchanges, where property upgrades can be part of the transaction, and reverse exchanges, allowing you to buy the new property before selling the old one.

Whether you're investing in vibrant markets like Seattle or Portland, or expanding your portfolio throughout the Pacific Northwest, a 1031 exchange can help you grow your real estate investments while deferring taxes. Be sure to follow the IRS guidelines to stay compliant and maximize your benefits.

Our knowledgeable staff is here to guide you through every step of the process, ensuring your transaction is handled with care and professionalism.