Tax considerations often influence whether people decide to sell a property or not. David Moore and Tom Moore, the Exchange Brothers of Equity Advantage, see many owners holding onto real estate longer than they otherwise would because they do not want to pay the associated taxes.
And this isn’t just affecting investment properties involved in a 1031 Exchange, but primary residences as well. With so many owners choosing to stay put because of the tax consequences, David is paying close attention to proposals that would increase the exclusion limits, which have remained unchanged since 1997.
One proposal would double the existing $250,000 and $500,000 exclusion amounts. David believes that would be a welcome change, although he also notes that even doubling those limits may not provide the same benefit they did when they were first established.
Why Higher Exclusion Limits Could Help
David acknowledges that some people may look at higher exclusion limits and assume they primarily benefit wealthier property owners.
He sees it differently.
Many of the people he talks to are sitting on properties because they do not want to pay the tax. That applies to owners of investment properties involved in a 1031 Exchange as well as owners of primary residences.
From David’s perspective, increasing the exclusion limits could help more people move forward with decisions they may already want to make.
Encouraging More Real Estate Movement
David believes that anything that helps stimulate movement can benefit property owners across the board.
Some people may assume that increasing exclusion limits primarily benefits wealthier individuals. David sees the issue differently.
Many of the people he talks to are sitting on properties because they do not want to pay the tax. That includes both primary residences and investment properties involved in a 1031 Exchange.
Higher exclusion limits could help remove one reason people choose to stay put. From David’s perspective, helping more property owners move forward can create benefits that extend well beyond any one group of owners.
More Investment Choice and Flexibility
Tom believes giving people more choices is generally a positive development. The more options people have, the easier it is to choose investments that fit their needs.
Whether someone is investing with IRA money or not, Tom believes having more choices available is a good thing for the market.
Looking Ahead
No one knows yet if these proposals will actually become law. But if exclusion limits do increase, they could help more property owners move forward with decisions they may already want to make.
That is why David and Tom believe these proposals are worth watching. Anything that helps people take the next step rather than stay on the sidelines has the potential to encourage more movement and create benefits that extend beyond individual property owners.
If you are planning a 1031 Exchange and want to understand how current rules may affect your situation, contact Equity Advantage to speak with an Exchange expert and explore your options with greater flexibility and confidence.
The Guys With All The Answers…
David and Thomas Moore, the co-founders of Equity Advantage & IRA Advantage
Whether working through a 1031 Exchange with Equity Advantage, acquiring real estate with an IRA through IRA Advantage or listing investment property through our Post 1031 property listing site, we are here to help Investors get where they want to be. Call them today! 503-635-1031.
FAQs About Exclusion Limits and 1031 Exchanges
What are the current home sale exclusion limits?
Current exclusion limits allow eligible homeowners to exclude up to $250,000 of gain from the sale of a primary residence, or up to $500,000 for certain married taxpayers. As David Moore notes, those exclusion limits have remained unchanged since 1997.
Why are some property owners interested in higher exclusion limits?
According to David Moore, many property owners continue holding real estate because they do not want to pay the tax associated with selling. He believes higher exclusion limits could help more owners move forward with decisions they may already want to make.
How could higher exclusion limits affect a 1031 Exchange?
David Moore points out that tax considerations influence decisions involving both primary residences and investment properties involved in a 1031 Exchange. While the proposals discussed in this article are not specific to 1031 Exchanges, he believes higher exclusion limits could encourage more movement among property owners generally.
