Video Transcript
Today I’ll be speaking on 1031 Exchanges in Massachusetts. Section 1031 is a federal tax code, which means you can complete an exchange by selling and buying investment property anywhere in the United States. This will defer up to 100% of the capital gains taxes state and federal, a huge tax savings which could be upwards of 30% of the gains you made on the investment.
However, Massachusetts does have what they call a clawback provision for 1031. Let’s say you sell your investment property in Massachusetts and exchange into a property in a different state. The Mass state capital gains taxes are deferred in the year that you sell. However, if in the future you sell that out of state investment property you had bought previously and do not participate in another 1031 Exchange to continue the tax deferral, Massachusetts will be looking for you to pay the state capital gains tax that was due to them from the original sale.
This is referred to as a clawback and it’s actually a great reason to keep exchanging. No taxes are due on sale and down the line as part of your estate your heirs could potentially receive the full stepped up basis, meaning no capital gains tax would be due.
Understanding the Massachusetts 1031 Exchange Process
If you have any questions about the Massachusetts 1031 Exchange process or any other 1031 Exchange topics, please visit our Massachusetts IPX 1031 web page at www.ipx1031.com/massachusetts. We’re happy to help.
Click to visit Massachusetts 1031 Exchange page