The Tax Cuts and Job Act and Like-Kind Exchanges Under section 1031 of the Internal Revenue Code, the owner of real property can sell that property and then reinvest the proceeds in a “like-kind” property and defer paying any capital gains taxes. To qualify as “like-kind,” the exchange must be done according to the rules in the tax code; it doesn’t mean the investor has to replace an apartment building with an apartment building, etc. Investors can reap significant tax benefits by taking advantage of the 1031 exchange, and in some areas, it’s considered one of the best-kept secrets in the Internal Revenue Code. A properly structured exchange can provide investors with the opportunity to defer all of their capital gains taxes. This results in an essentially interest-free, no-term loan from the government. Instead of paying the taxes now, the investor can put those dollars to work on other investment properties. This type of investment is most similar to rolling over funds from one IRA into another. The Tax Cuts and Jobs Act retained the ability for investors to perform like-kind exchanges (1031 tax-deferred exchanges) and defer paying capital gains taxes on sale proceeds. Lost, however, was the ability to exchange any type of personal property, such as farm equipment. Transfer of Tax Exemption for Veterans The 2020 Florida legislative session saw two important updates to property tax laws, specifically geared toward military members and their families. The first law, House Bill 1249, effective July 1, 2020, applies to: * Totally and permanently disabled veterans * The surviving spouses of totally and permanently disabled veterans The law allows qualifying veterans and their surviving spouses to receive a refund of certain property taxes paid on a new homestead property that they acquire between January 1 and November 1 of a given tax year. To qualify, they must have received a similar homestead tax exemption on another property in the same tax year. Property Tax Credit for Military Spouses Along the same vein, House Joint Resolution 877, effective January 1, 2020, allows a homestead property tax discount for a disabled veteran to be transferred to the veteran’s surviving spouse upon the veteran’s death, provided that the veteran had received the discount. In other words, a surviving spouse can’t apply for the discount after the veteran’s death, but if the veteran had already been receiving it, it can be transferred to the surviving spouse. Qualifying veterans must be 65 years of age or older and have a partial or total combat-related disability. Surviving spouses who remarry are ineligible for the homestead exemption transfer. Changes for Homeowner Associations For properties in homeowner associations, the new law: * Permits associations to adopt rules to allow for posting meeting notices and agendas on a website and emailing members meeting notices and agendas * Requires sign-in sheets, voting proxies, ballots, and all other papers related to association voting to be maintained as official records * Makes any information an association obtains in connection to guests visiting homeowners in a gated community confidential * Provides that an amendment to the governing documents that restricts the right to rent a parcel may only be applied prospectively and provides that a change of ownership does not occur for purposes of applying an amendment restricting rental rights when a parcel owner conveys the parcel to an affiliated entity, when beneficial ownership of the parcel does not change, or when an heir becomes a parcel owner This means that: * An association may not retroactively restrict the right of an owner to rent out a parcel. * An association may not use the transfer of a parcel from one owner to another to apply a rental prohibition if the owner conveys the parcel to an affiliated entity or an heir Clarifies that payment of a fine is due five days after notice of the fine is provided This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit richdelivers.substack.com/subscribe
