Got the summer itch for traveling? If so, you’re like most Americans. Based on our recent research, we’re gearing up for a very busy travel summer.
Most of us, having been in our homes for a very long time, now want to discover new places, cuisines, landscapes, activities and simply reconnect and refresh. Whatever the reason for travel and mode of travel, we’re hearing about trends of:
- “Bleisure” trips / ‘workations’ combining business/work travel and vacations for longer periods of time
- Comfort in sticking closer to home and opting for Airbnb, VRBO or vacation home rental properties
- Domestic travel and staying local or closer to home
- Experiencing the great outdoors and scenic beauty in national parks and beach destinations
- Road trips. RV parks. Tiny home camping or glamping
- Purposeful excursions and experience-driven travel
And with these travel trends blossoming, what will this mean for investors? If you are an investor, should you think about renting your investment property? Convert a long-term rental into short or extended stay rentals? Make a new purchase? These are great questions to discuss with your financial planner or tax advisor and IPX1031, as a 1031 Qualified Intermediary, is the expert resource for you and your advisors regarding structuring vacation property purchases and sales as tax deferred transactions. Here are a few tips for 1031 and vacation properties:
- Do vacation (or second) homes qualify for Section 1031 tax deferral? Yes, vacation investment properties may qualify for 1031 treatment. There are clear guidelines on which transactions qualify. Plan ahead and make sure the property you’re buying or selling qualifies.
- Real estate is a hot commodity and competition is fierce. For 1031, identification and timing are critical. Make sure you don’t experience any failed exchange pitfalls.
- Think outside of the box. Can you capitalize on a dual use property? 2 Is Better Than 1: A 1031 Win with Dual Use Property
Bottom line – 2021 travel and vacation plans are booming. A vacation property may be a great return on your investment, provide a reliable income stream, and may give you access to an excellent vacation spot, if you plan properly. As Covid-19 has led people to think more carefully about the way and where they travel, investors may want to discuss with their tax advisors 1031 tax deferral opportunities.
As with any 1031 Tax Deferred Exchange, proper planning is needed. Consult with your tax and legal advisors about your specific situation. In addition, please visit www.ipx1031.com for our many resources about 1031 Exchanges.
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How Will Americans Travel in 2021?
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Do Vacation and Second Homes Qualify?
How to Maximize 1031 Via Your Home Office
2 Is Better Than 1: A 1031 Win with Dual Use Property
With the current market moving as it is, an understanding of Section 1031 is essential to creating opportunities for investors looking for options to reposition assets, generate more cash flow and protect estates. Don’t “just pay the tax” because you think it’s the lowest it will ever be. Keep your equity and let it work for you.
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