26 Aug Will I owe taxes when I sell this home at the Shore?
Q. I am selling my investment property in Ocean City, N.J. for $1.2 million. I’m using a 1031 exchange. What taxes are due?
— Trying to save
A. There are often tax consequences when you sell a property, so let’s talk about your plan.
A 1031 tax-deferred exchange is a section of the tax law that allows real estate property owners to trade one property for another while avoiding having to pay any federal or New Jersey state tax on the sale, said Gail Rosen, a Martinsville-based certified public accountant.
“The gain is deferred until the current property you just traded for is sold,” Rosen said. “For your property to qualify for a 1031 exchange, you need to pay a qualified intermediary to make sure the exchange is properly structured.”
Personal residences are not qualified for this kind of exchange.
So the good news is that if the property qualifies as tax-deferred for federal purposes, it will also qualify for New Jersey purposes, Rosen said.
But not every state recognizes a 1031 exchange. Pennsylvania, for example, does not, Rosen said.
Email your questions to moc.p1582169362leHye1582169362noMJN1582169362@ksA1582169362.
This story was originally published on Aug. 26, 2019.
NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.