The President’s 2023 budget currently includes some proposed tax changes to the 1031 exchange benefit. The proposed changes, if passed, could limit 1031 exchanges to an annual maximum deferral of $500,000 per person. This means that if you sold a rental property for a $800,000 taxable gain, a 1031 exchange may only help you defer up to $500,000 of that gain and the remaining $300,000 could be taxable in the current year.Boston condos
According to a study by Ernst & Young
President Biden’s proposal would not only severely limit the property values that investors can use in an exchange, but also adversely impact the overall economy. While this proposal is intended to generate $1.95 billion in revenue for the government through taxing the sale of real estate, many people don’t realize that taxes paid and related to businesses using like-kind exchanges were already projected to produce $7.8 billion for the IRS last year, according to a study by Ernst & Young
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To be fair, there is no indication that this section in the proposed budget will pass and become law anytime soon.
source: Real Estate Taxes