1031 Exchanges are a proven method for purchasing tax-deferred properties. As such, the procedure is highly valued and put to use often by investors who already own real estate. However, when windfalls like these lead to continual prosperity, there’s a tendency to become worried— as if the wells of good fortune may soon dry up.
Take the anxiety currently being voiced by many in the industry, where “Does Washington see it as a loophole that should be done away with?” is a common refrain. The uncertainty has even expressed itself in online real estate discussions. But how justified are these types of fears?
A look at the interests who support the 1031 Exchange’s continued existence will give us a clue.
Who’s Invested in the 1031 Exchange?
The National Association of Realtors
The fact that such a powerful interest as the National Association of Realtors (NAR) benefits from the tax savings brought about by like-kind transactions may put your mind at ease. In fact, you can be sure that they will continue to promote how the process brings more capital into markets, while also boosting local economies.
The powerful NAR element (they’re America’s largest trade association) combined with the fact that so many realtors utilize the 1031 Exchange option (63% of all total realtors between 2011 and 2015 in fact), means the helpful procedure will continue being lobbied for… and when it comes to the real estate lobby, you can be certain that it’s a powerhouse!
The Washington Lobbyists
Investors can rest assured knowing that the NAR has traditionally been the #1 source of funding for the real estate lobby (they contributed $45.2 million in 2016, according to opensecrets.org, a center for responsive politics group). You can also be certain that they will continue to fight for every investor-friendly regulation in the U.S. Tax Code. However, with our changing political climate, who can say with any certainty how successful they will continue to be?
Is it a “Loop Hole?”
With the recent controversy regarding President Trump’s reticence to release his tax returns and the suspicion that he’s used depreciation as a loophole against paying income tax over many years (this hasn’t been proven), the real estate industry has been under the microscope.
In fact, the industry may be the most tax-sheltered in the U.S.— a lofty entitlement that may have worn out its welcome; however, whether or not Congress acts on what everyday people may see as a loophole for the ultra-wealthy remains unclear.
So what conclusion can be reached regarding the preceding? Namely, that you can be certain that—when it comes to the 1031 Exchange’s continued existence— nothing is certain! Therefore, out of an abundance of caution, it makes sense to utilize it as much as you can, while you can. In fact, the next step you can take is to utilize the 1031 exchange through HomeUnion®. HomeUnion® enables more efficient use of the 1031 Exchange option by handling the entire real estate investing process. To get started, schedule a consultation with one of our Solution Managers or call 888-276-0232 today.