Recently, the Biden Administration proposed a $500,000 cap on the 1031 like-kind exchange, which is a section of the U.S. tax code that allows investors to avoid paying capital gains taxes when selling an investment property and reinvesting the proceeds into a similar property. The National Association of REALTORS® and KCRAR are both advocating against the cap in order to foster economic development and promote job growth for people from all walks of life.
The topic was discussed in KCRAR’s recent meetings with the Kansas City region’s elected U.S. lawmakers. KCRAR and NAR believe the 1031 like-kind exchange encourages additional investment, and helps small businesses grow. Additionally, they argue that like-kind exchanges fill gaps in the housing supply not covered by other incentives for the development of affordable housing, such as multifamily housing, which represents 40% of real estate like-kind exchange transactions.
“Members of Congress need to be aware that the 1031 like-kind exchange program is not a tax avoidance but tax deferral program,” said Jeff Carson, KCRAR Director of Kansas Advocacy. “One that helps to stimulate the market at all levels and is particularly useful to many commercial practitioners.”
To help preserve the 1031 like-kind exchange, NAR is reaching out to its members for their testimonials about how they’ve used 1031 to bring development and economic benefit to the community. It hopes these testimonials will help in its effort to demonstrate that 1031 is not a tax loophole for the wealthy but is a tax tool that brings revenue, jobs, investment and economic benefit to the U.S.