1031 exchange
A federal tax rule that lets an investor defer capital gains tax by selling an investment property and buying another under strict timelines and rules. Talk to a tax pro first.
Also called: like-kind exchange, Starker exchange, tax-deferred exchange, 1031
Related terms
Tax on the profit from selling an asset, based on the sale price minus your cost basis. Many homeowners can exclude part of the gain on a primary residence they have lived in long enough.
What you paid for a property plus certain purchase costs and improvements, minus depreciation taken. It is subtracted from the sale price to figure your taxable gain.
A tax deduction that spreads the cost of a rental building, not the land, over its useful life, 27.5 years for residential rentals. Depreciation taken may be taxed when you sell.
Real estate bought to rent to tenants for income rather than to live in. Lenders, insurers and tax rules treat it differently from a primary residence.
A designated low-income area where investing capital gains through a qualified fund can bring federal tax benefits. The rules and holding periods are detailed, so talk to a tax pro.