Tax Deferred Investments Discover the Misconceptions

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The reverse 1031 exchange becomes the best answer when an investor has found, and is ready to close on the new property. This all happens while the investor is still trying to sell the old, original property. Another reason to setup a reverse 1031 exchange includes securing your new property to avoid the risk of possibly loosing that property. Also this rids yourself of the replacement property "dilemma" once you have sold that old (original) property, because there is a short 45 day window to find a suitable replacement investment property.

Taxable accounts are really everything else. You contributed to them with after-tax money which gives them a tax basis. Those types of investments that earn interest or dividends are taxed yearly; those investments you sell (like stocks, or property) will be subject to a capital gains tax - but only in the year you sell them.

Why do a 1031 Exchange? No matter how nice your rental is, no matter how well built, if it's a 65-year-old home with three bedrooms and two full baths, its closets are probably too small and the kitchen is still decorated in the "I Love Lucy" era fashion. There's no great room, and no cathedral ceiling. In an era when people eat out or eat quickly, a great dining room has less appeal than in the past. Simply put, a lot of renters are interested in features not found in this type home.

A common concern many people have regarding fixed income annuities is in regards to their tax treatment. The concept behind fixed income annuities is actually quite simple. A fixed annuity is simply an insurance product which pays out a fixed income over a specified period of time. This payment is determined at the time of the contract and typically does not vary.

Let's look at some figures to get a better picture. Let's say that you invest $1000 pre-tax over 10 years earning 6%. At the end of 10 years, your investment would have grown to $1790.85. Now, you want to access the money and you are in a 35% tax bracket. So that's $1790.85 - $626.80 = $1164.05.

A financial representative will help determine if tax deferred savings can be a good fit for your lifestyle. If you do some financial retirement planning now, you can pave the way to your golden years with ease.

Note: the 1031 tax-deferred exchange is often known as a deferred exchange, a "like-kind" exchange, a Starker exchange (you will see why later in this article), or it is often simply known "a 1031". No matter what it is called, investors can defer the tax by reinvesting into another investment property if they follow the strict rules. It is one of the tax benefits of investment real estate ownership.

Annuity tax deferral allows investments to have gains that grow tax free. In other words, the accumulation period is free of tax. The taxes are however due when the distribution period is started for the annuity. At distribution, gains are taxed as ordinary income rather than as capital gains. This treatment is because an annuity is considered an insurance product. Currently, this treatment is a disadvantage to annuities. However, the taxation rules are always subject to change, and have changed drastically over the years. Also, the tax-deferred gains advantage of annuities outweighs the tax treatment difference, especially given long investment terms (10+ years).

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