Honolulu (KHON2) – Kay Mukaigawa of Engel and Volkers explains misconceptions of 1031 Exchange.

As more Hawaii residents sell property, homeowners can take advantage of the 1031 Exchange, in which Kay Mukaigawai, CEO and Founder of Engel and Volkers says there are a lot of misconceptions. 

“Homeowners need to remember that whatever you sell your property for is the amount you have to exchange.  In this particular case, if you sold for $900,000 you need to exchange $900,000. People also need to think they can deduct the original sales price from their exchange.  Unfortunately, the original purchase price has no bearing on a 1031 Exchange, so what they bought the house for doesn’t matter.  Again, in this case, they would need to exchange the full $900,000,” says Kay Mukiagawa, CEO and Founder of Engel and Volkers.

According to Mukaigawa, homeowners that lived in the home 2 of the last 5 years, can also take advantage of the home exclusion, which is Internal Revenue Code (IRC) section 121.

Mukaigawa says, “we call this a double tax strategy, they can deduct approximately $500k from the sales price and only have to purchase $400k to have a valid 1031 Exchange. Exclusion may vary based on length of rental.”

Those looking to learn more about 1031 Exchange as well as other real estate advice, are encouraged to check out the official website of Engel and Volkers.

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