Why 1031 Exchange If I Am Going To Have To Pay Taxes Eventually?

Why 1031 Exchange If I Am Going to Have to Pay Taxes Eventually

We are frequently asked: why perform a 1031 exchange if I’m going to have to pay taxes at some point?

This statement is not entirely true. There are two ways that you can do a 1031 exchange and potentially NEVER pay taxes.

  1. With careful planning, you could convert your 1031 exchange property to your primary home. After two years of renting out a 1031 exchange property, you have the option to convert it to your primary residence.
  2. If converting your investment property to your primary home does not interest you, there is another way to avoid ever paying taxes from property acquired during 1031 exchanges. Many people adopt the strategy of doing exchange after exchange to defer the taxes until their death. When you pass away, all capital gains accumulated over the years of doing 1031 exchanges are eliminated. This would allow your heirs to inherit the property on a stepped-up basis (meaning they inherit the property at the current fair market value of the property).

Midland 1031 is a qualified intermediary and is not a fiduciary or financial advisor. As with any investment you should always consult with your CPA or tax advisor for more information.

As a subsidiary of 1031 Tax-Free Strategies, Midland 1031 serves as a Qualified Intermediary (QI) in facilitating 1031 exchanges for clients across the nation. We have two Certified Exchange Specialists® (CES®) on staff to ensure your exchange is performed correctly.

When you perform a 1031 exchange you are able to exchange investment or business use real estate to defer capital gains, depreciation recapture tax, healthcare, and state taxes. It is critical these transactions be completed properly and with great attention to detail to protect your investment and to remain in compliance with industry rules and regulations. Midland 1031 works closely with you to make sure this happens.

To start your 1031 exchange or for general 1031 exchange questions, please contact Midland 1031 at 239-333-1031, or visit

For information regarding real estate investments within an IRA, contact Midland Trust at 239-333-1032, or visit