HomeBusinessTax overhaul saved one...

Tax overhaul saved one thing

It’s the holiday season and time to concentrate on family, friends and good cheer for all. There’s also one more thing that starts working its way into the deeper recesses of our brains in December – taxes.

Last year’s substantial tax overhaul resulted in a lot of people being not too happy, especially property owners. Caps on mortgage interest and local and state property taxes have homeowners and investors holding their breath waiting to see what their 2018 tax returns are going to look like. However, one of the favorite tax breaks for investors was not touched and that’s the 1031 Exchanges.

A 1031 Exchange allows you to exchange or reinvest proceeds from your original property and defer the capital gains on the profits from the sale. The exchange only applies to properties held for business or investment, therefore, your personal and primary residence is not eligible for the benefits of the exchange.

Prior to the tax overhaul properties could be exchanged for like-kind properties, which included all real property including artwork and valuable collectibles. Now, however, that part of the law has been amended to allow for only real estate to be recognized as an exchange.

Although the 1031 Exchange benefits big investors, it also can be an advantage for small investors and second home and vacation homeowners who take the time to establish their property as a rental income producing property. It’s possible to trade up your vacation home to a larger one by converting your second home from personal to business use by renting it for a specific number of days for at least two consecutive years. This is a nice way to defer the capital gains on your vacation property, which typically does not qualify for a capital gains exemption since it’s not your primary home, while still giving you the ability to purchase a larger home for your family.

There are certain criteria you have to meet to qualify for the exchange. You have 45 days from the date of the sale of the old property to identify potential replacement properties. In addition, you must acquire the new property no later than 180 days after the sale. It sounds a little complicated, but individuals use this tax break successfully multiple times and just keep rolling over the capital gains into another property. This can also be used to preserve wealth invested in real estate, which is a little more complicated.

As with any tax questions and changes, you need a competent CPA and/or tax attorney to review your particular situation before undertaking this process. And remember, your primary home is not eligible for an exchange and is subject to and also benefits from a whole different set of IRS regulations. Certainly, I have no way of knowing if 1031 Exchanges are used for investment properties and second homes on Anna Maria Island, but my guess is that the Island and its ever-increasing property values is prime for one of the IRS’s most popular exemptions.

So, while you’re sipping the eggnog and wrapping gifts, start thinking about April 15.  If you plan ahead, Santa may leave you a very substantial gift in your stocking in a couple of years. Now that’s what I call a stocking stuffer.

More Castles in the Sand:

Anticipating condo special assessments

So, you want to be a real estate investor

Before you sell, become a home historian

Most Popular

More from Author

Declutter, depersonalize, clean

After perusing what I like to consider my very organized database...

Winter of the big freeze

You should have warmed up from the unusually cold Florida winter....

Are mortgage rates really going down?

Did we ever think this day would arrive? Those in the...

Insurance premiums painful

There are few things related to the real estate industry that...

Mangrove jurisdiction differs by county

ANNA MARIA – The outcome of the removal of 116 feet of mangroves to build a seawall at a Gull Drive home may have been different if the property had been located in Sarasota County instead of Manatee County. A contractor removed some of the mangroves prior to...

Bunny & Pirates Bazaar to close soon

CORTEZ – The closing of Bunny & Pirates Bazaar is imminent, but not by the choice of owners Elizabeth Shore and Jeffrey O’Connell. The news of the closing was announced by the two business owners on Facebook on March 16, two days after a notice to vacate was...

Anna Maria responds to county consolidation option

ANNA MARIA – The city of Anna Maria has responded to a March 5 request for information from OPPAGA regarding the potential consolidation and annexation of the city into Manatee County. The cities of Holmes Beach and Bradenton Beach received similar requests from the Office of Program Policy...

Jewelry Sale offers great deals for a great cause

HOLMES BEACH - For the second year in a row, the Anna Maria Island community has shown incredible support for the Island Branch Library. The Friends of the Island Library (FIL), a group of volunteers dedicated to fundraising and support for the library, held their second annual...

Ellen Scott celebrated

BRADENTON BEACH – Family and friends joyously celebrated the life and legacy of longtime Braden­ton Beach resident and honorary Privateer Ellen Scott at the Drift In on Saturday, March 16. Ellen passed away on March 1 at the age of 85. Ellen’s son, Bob Slicker, thanked those in...

Anna Maria increasing vacation rental registration fees

ANNA MARIA – The city is increasing its occupancy-based annual vacation rental registration fee from $84.17 to $93.92 per occupant allowed by the local vacation rental ordinance. The annual registration fee is estab­lished each year by the adoption of a city commission-approved resolution. The increased fees were established...

City Park renamed Jan Vosburgh Park

BRADENTON BEACH – The park across the street from city hall, referred to only as City Park, will be renamed after longtime City Commissioner Jan Vosburgh. The discussion of the naming of the beach access park just south of the Beach House parking lot was introduced at the...

Bird Tips

During bird nesting season, March through August, please follow these tips: Never touch a shorebird chick, even if it’s wandering outside a staked nesting area. Teach kids not to chase birds – if they’re disturbed, bird parents may abandon nests. Don’t feed birds – our food is...

Government calendar

Anna Maria 10005 Gulf Drive For information, call 941-708-6130 Please visit www.cityofannamaria.com or contact city hall for more information. March 21, 1 p.m. – Charter Review meeting March 28, 6 p.m. – City Commission meeting March 29, all day – City offices closed, Good Friday   Bradenton Beach 107 Gulf Drive N. For information, call 941-778-1005 Please visit...

Beach Nutz

       

Events

Wednesday, March 20 Creative Aging: Figure Drawing, Island Branch Library, 5701 Marina Drive, Holmes Beach, 10 a.m. Holy Yoga, Roser Church outdoor stage, 512 Pine Ave., Anna Maria, 11:30 a.m. Nature Art, Robinson Preserve Mosaic Nest, 840 99th St. N.W., Bradenton, 1 p.m., $10 Coral Reef Science with Mote, Island Branch...