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A 1031 exchange is a tax strategy that allows you to defer paying capital gains taxes when you sell an investment property, as long as you reinvest the proceeds into a new, like-kind property. This means you can sell one property and buy another similar one without immediately paying taxes on any gains from the sale.
These like-kind exchanges are covered under Section 1031 of the Internal Revenue Code (hence the name "1031 Exchanges") and apply to federal capital gains taxes. However, each state has their own tax code, and may have different rules for real estate tax withholdings, the ability to complete a tax-deferred sale, or the rules around like-kind exchanges. Below we'll dive deep into these state-level specifics.
The Combined Rate accounts for Federal, State, and Local tax rate on capital gains income, the 3.8 percent Surtax on capital gains and the marginal effect of Pease Limitations (which results in a tax rate increase of 1.18 percent).
Indiana has a flat state income tax rate of 3.23% (as of 2017), regardless of income level. $1,000 is a base exemption. If dependents meet certain conditions, filers can take an additional $1,500 exemption for each.
1031 exchanges in Indiana aren't unique compared to other states in the U.S. The rules and processes for a 1031 exchange, as governed by Section 1031 of the Internal Revenue Code, apply uniformly across all states. This means that the fundamental requirements, such as the need to exchange like-kind properties, the use of a Qualified Intermediary, and the strict timelines for identification and acquisition of replacement properties, are the same whether the exchange involves properties in Indiana or elsewhere in the country.
Many states recognize and follow the federal rules for a qualifying 1031 exchange. We recommending reviewing these resources for 1031 exchanges at the federal level - learn about the rules for an exchange, the key deadlines you must meet, and why you are required to work with a Qualified Intermediary like Deferred.com.
7,047+ Exchanges (and counting...) - Deferred is redefining how 1031 exchanges should be. Our experienced team delivers a service level that exceeds expectations, with no fee—while earning you interest on your exchange funds.
