Another Reason to Exchange, New State Tax Added
November is tax season, but not for the IRS. It is the time of year that states have new taxes on their ballots. That was the case in Massachusetts this November.
The constituents of the state of Massachusetts passed ballot Question 1 on November 8, 2022 which increased their state tax on incomes over $1 million by 4%. For a summary of the ballot initiative, please click the following link - https://ballotpedia.org/Massachusetts_Question_1,_Tax_on_Income_Above_$1_Million_for_Education_and_Transportation_Amendment_(2022).
This question’s passage makes the 1031 Exchange more valuable in the state going forward as taxpayers will be able to defer the larger amount when selling real estate and doing a 1031 Exchange. Taxpayers who live in or are selling property in the state of Massachusetts can still defer this larger liability by entering into a 1031 Exchange before the sale of their property.
Even if you do not live in or own property in Massachusetts, it is important to understand the value of the 1031 Exchange. It does allow for the tax deferral on the following taxes:
- Federal Capital Gains
- State Capital Gains
- 3.8% Net Investment Income Tax
- Recapture of Depreciation
This is just a reminder of why 1031 Exchanges are a valued tax strategy and important for your tax and retirement strategy.
For additional information, please reach out to your tax professional for specific questions or contact the specialists here at Security 1st Exchange for assistance.