Illinois 1031 Exchange:
A 1031 exchange allows Illinois real estate investors to postpone capital gains taxes by investing sale proceeds of a property in a like-kind property. The strategy preserves capital, increases cash flow, and grows investment portfolios.
Requirements
Like-Kind Property: Must be for investment or business purposes (e.g., rental buildings, commercial property).
Qualified Intermediary (QI): Must conduct the transaction; investors must not handle sale proceeds.
45-Day Rule: Acquire a replacement property within 45 days of selling the original.
180-Day Rule: Complete purchase within 180 days of sale.
Equal or Greater Value: In order to maintain taxes suspended entirely, the replacement property should be equal or greater in value.
Illinois-Specific Issues
State Taxes on Boot: Any remaining sale proceeds become liable for Illinois’ 4.95% income tax.
Moving Out of State: Future taxation may result if swapping into another state.
Local Regulations: There may be additional taxes or zoning laws in specific municipalities, i.e., Chicago.
Common Mistakes to Avoid
Failure to meet deadlines (45-day and 180-day regulations).
Using proceeds improperly (shall be kept by a QI).
Acquiring a property that is non-qualifying.
How Rincker Law Can Help
A 1031 exchange is managed through careful planning and compliance with strict IRS and Illinois rules. At Rincker Law, we are here to help real estate investors navigate the 1031 exchange process, ensuring smooth transactions and tax deferral benefits. Whether you’re buying, selling, or looking ahead to your next investment, our team is here to help.