For many years, Pennsylvania has been one of the few states that did not recognize like-kind exchanges (also known as 1031 exchanges or land swaps). Now, with the passing of Act 53 of 2022 by Governor Wolf, Pennsylvania finally has adopted 1031 exchanges. This change may lower your tax burden on real estate transactions and even encourage more investment in the state.
What is a Like-Kind Exchange?
A like-kind exchange is a strategy under the Internal Revenue Code to exchange property of the “same nature, character, or class” without paying federal income tax. The type of property usually doesn’t matter as all real estate is considered like-kind to each other so long as it’s located in the United States of America. For example, an investor may want to sell her residential rental to purchase an apartment building or an office building.
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