There was a scramble in the real estate world on the eve of 2012, when agents pushed to close as many like-kind deals before Obama’s 3.8% imposed Medicare tax on capital gains hit the following morning. We may be seeing an amplified scramble, yet again, if Biden’s proposed plan to end 1031 Exchanges comes to fruition in 2021.
Democratic Presidential Nominee, Joe Biden, plans to bolster federal aid for children, senior citizens, and people with disabilities. However this may come at the expense of like-kind exchanges which account for roughly 20% of all real estate deals today—an impact that will be felt by property owners large or small.
“Biden says eliminating 1031 exchanges for well-heeled real estate investors, as well as stepping up tax enforcement for the wealthy, will amount to $775 billion over a decade. Congress’ Joint Committee on Taxation projected that between 2019 and 2023 real estate investors will defer $51 billion in capital gains using like-kind exchanges, as cited by Bloomberg.”TheRealDeal.com
1031 Exchanges, or like-kind exchanges, have endured scrutiny before. They’ve been given the benefit-of-the-doubt, and often only faced empty-threats that never came through. But Erin Hudson alludes to the possibility of Biden obtaining partisan support for this axing due to President Trump’s eagerness in using 1031 exchanges for his real estate business.
The remainder of 2020 will prove to be crucial for property owners looking to reallocate capital gains into an asset that will generate far more revenue. 1031 exchanges could be seeing it’s biggest threat and property owners will miss out on the chance to make a lot more money.