So now if you have 500k+ gains in a property you can't move the money over to the next property without paying taxes. Not likely many of us but still it effects us indirectly.


I had thought the stock market would suffer as many wealthy would pull their money out and move money into real estate due to the possible proposed capital gains tax in around 47%. But now it looks like that money will move into small family real estate, literally going to make it impossible for a first time home buyer to get anything fort a decent price, if at all depending on the state and individual market availability.



Thoughts on housing prices due to the influx probably into small family homes? and also what effect will this have on the stock market?




"The U.S. president aims to abolish the like-kind exchange rule, which allows property owners to defer tax payments on investment gains of over $500,000."


https://www.bloomberg.com/news/artic...ment-tax-break

This only affects flippers.

Having said that flippers have played a huge part in reviving shthole areas.

This has been rumored for a while, is the article specific? It’s behind a paywall.

No this affects anyone who sells real estate and wants to buy other real estate.

“Flippers” is a term usually used for short term buying and selling.

It also effects farmers and commercial property owners. I know quite a few farmers that have sold their farms and moved the money into commercial property. Or, if you are trying to move your investments from one state to another.
Removing the 1031 tax free exchange will now decrease the available capital for re-investment due to having to pay the tax.

You know what would be nice? If you actually knew even a smidge of your country's tax codes.

Working for me, here it is.


"The U.S. president’s new economic plan calls for abolishing the right to defer certain tax payments on property-investment gains of over $500,000, part of a broader effort to raise taxes on the rich to pay for the expansion of services including free preschool to less-wealthy Americans.



Known as a like-kind or “1031” exchange, the perk allows property investors to roll the proceeds of real estate sales into future purchases without paying capital gains taxes on profits. This deferral process can theoretically continue indefinitely until the investor’s death, and if assets are passed to an heir, the capital gains tax bill is often wiped out.

The strategy was projected to save investors $41.4 billion between 2020 and 2024, according to Congress’s Joint Committee on Taxation. These figures, however, don’t break down how much of this benefit applies to gains greater than $500,000.

QuicktakeHow does the like-kind exchange rule work?
Who will the changes hit?

Exclusively investors in property, such as those who own residential real estate. These can be large investors or small landlords. While the like-kind rule once applied to things like industrial equipment, Congress closed the loophole for most other industries in 2017.

It’s still a much-used tactic in the property industry, including by Donald Trump’s son-in-law, Jared Kushner.

But by far the biggest beneficiaries of the current rules are individuals. According to the JCT figures, this year corporations will benefit to the tune of $2.3 billion while individuals will gain $5.7 billion.
Investors with lower gains won’t be hit by the changes since the provision, sometimes referred to as a 1031 exchange because of its tax code designation, can continue to be used for proceeds below $500,000.
The president’s proposal — called the American Families Plan — also includes a proposal to axe private equity’s most lucrative tax break.

This isn't a new concept. Untaxed gainz on property were capped at 250k when i learned tax in college... 1994 or so.

I didn't realize the cap went away???

500k untaxed gain seems reasonable. Anything more should be considered income.

The break treats compensation from carried interest — which for some managers can add up to millions of dollars — like capital gains, which are taxed lower than wages at the top marginal income rate. This break is often tied to property projects.

The proposal is part of Biden’s wider plan, which includes a range of new social spending, from paid medical leave to tuition-free community college. Some Democratic lawmakers are already urging him to go further and include new health care benefits, whereas some from high-income states are likely to be concerned at some of the proposed tax increases.

With the Republicans unlikely to back the bill and the Democrats with only a narrow majority in Congress, the vote on the overall package could be tight.
If it passes, when would the rules change?

There’s no date set yet. Bear in mind that when major tax changes occur, they often contain grandfathering arrangements so they don’t apply retrospectively."

U w0t m8? You also just contradicted yourself in a way.

So far it’s clear that this topic is above the pay grade of misc. Zero comprehension by anyone so far of what a 1031 exchange even means or why it exists.

At least no more mean tweets from orange man

Why would anyone who's not a professional real estate investor or tax professional be interested in this topic?

They wouldn't.

So take your pay grade and shove it up your ass.

On paper it sounds great


Where do you think those wealthy are going to be putting their money? If not the stock market or commercial real estate. Not even considering the factor of them just putting their money into investments outside the US.

It does affect you, maybe not as directly but it will if you're in the market to any degree.

Owning rental property isn’t exactly a rare thing.

But regardless, that’s an interesting excuse to come in and be wrong about something when the OP article has a middle school level explanation of the topic.

People should take interest in tax laws that can have sweeping impacts on the economy. Meaning it could indirectly impact you even if you’re below the pay grade.

You aren’t understanding the purpose of the law.

If you own a commercial property that has appreciated from a value of 1mm to 3mm, and you want to sell this property and buy another one of equal value, you cannot do that because you are taxed on the 2mm. So business commerce is disincentivized. The 1031 exchange gives you a short time window to sell a piece of commercial property and buy another one for like-kind usage without paying taxes on the gains.

It’s not about “500k per tax year” whatever that means because this has nothing to do with tax years.

It is not a loophole it is a specific intent tax rule.

If you had millions or billions in commercial properties and could sell them now and not pay the tax rather than have a good chunk of your gains taken from you that you put the risk in to invest and earn. Why wouldn't you sell now, collect your gains and shift your money into something else and not pay the tax? and with the addition of the possible capital gains tax in the stock market(47% and up to 60 something % in some states I believe) I don't see them putting the majority of their money there.

Those wealthy are wealthy for a reason, they will always find a loophole or move their money in the changing market. It really hurts the middle class and those trying to grow their wealth.

Agreed. 500k is the current Max for those who are married and selling property anyway. Anything behind 500k gets taxed.

That is a completely unrelated tax rule on a completely unrelated capital gain.

How many people are making 500k on flips? That seems like an incredibly small % of the flip market.

Brb selling property for $499K capital gain when the time comes

This. $500k untaxed gains is still a crapload

Fair enough. I’m still not sure how many ordinary people are going be affected by this. I’d imagine a very small percentage.

It, plus more is going right back into the market. This kills incentive.
You're missing the point.

And? If you get a $500k gain in stocks, you gotta pay taxes. Why should real estate be any different? I thought everyone wanted to close tax loopholes for the rich?

I am far from an expert, but doesnt the 121 Exclusion still protect the VAST majority of folks. So then this would primarily be closing the loophole on flippers?

I kind of see what Biden and co are doing here between this and the 47% capital gains proposal. They realize that there is way too much money in asset markets, so they are trying to drain some off the top without scaring everyone with a rate hike.

To me, printing $5T at zero interest and then taxing a few bil of that back into your own pocket is a bit like keeping your car's gas pedal down at 80 MPH and simultaneously tapping the brakes. I think it's a half measure and unlikely to work. But it is politically expedient (only targets people making chittons of money in the 1st place, small group/easy target) and doesn't create much risk of toppling the market, so I can see why they would do it.

I feel like I’m explaining this to a bowl full of goldfish repeatedly, but the 1031 exchange was never “untaxed gains” it was tax deferred gains for businesses to carry forward effectively in a very strict and very short time window between selling and buying a commercial property for equivalent usage.

If anyone is interested in being informed on 1031 exchange and the posts and articles ITT aren’t sufficient, a cursory google search would handle it in about 25 seconds of reading.

It will directly impact upper middle class people and indirectly impact everyone else as is always the case when anti-business tax laws are passed.

That's a whole other topic, and yes you're right about paying on stock sales. Could be 58.2% or higher if living in a state like new york and selling stock lol. Selling stock and selling real estate using this "loophole" is actually different. The money goes right back into real estate, not always the case with stocks.(someone correct me if I am wrong)


Over 55% on selling stocks, think about that, that's another thing that blows my mind. The proposed Biden tax on long term capital gains.

Who takes all the risk? The buyer, and who takes over HALF the profit? The government. What do they do for the wealthy? and what is their incentive to keep business and investments in the US?


These taxes sound great on paper, but they DO affect us. Who are mostly middle class I am guessing, I am glad I am not upper middle class lol. Because why?