President Biden’s 2024 Budget
President Biden has released his proposed budget for 2024, which again looks to eliminate 1031 like-kind exchanges. A 1031 exchange is a tax-deferred exchange from Section 1031 of the Internal Revenue Code (IRC) that allows real estate investors to defer capital gains taxes when selling one investment property for another. This tax-deferred exchange involves using the proceeds from the sale of the relinquished property to acquire anotherlike-kind piece of real estateof equal or greater value.
In a statement from the White House on Thursday, like-kind exchanges were referred to as a “sweetheart deal.”
“Eliminate Tax Subsidies for Real Estate.The Budget saves $19 billion by closing the “like-kind exchange” loophole, a special tax subsidy for real estate. This loophole lets real estate investors – but not investors in any other asset – put off paying tax on profits from deals indefinitely as long as they keep investing in real estate. This amounts to an indefinite interest free loan from the government. Real estate is the only asset that gets this sweetheart deal.”
Help Us Preserve Section 1031
This isn’t the first administration to attempt to eliminate or change Section 1031; it’s a natural target for the Biden administration to generate additional revenue for the IRS. In April 2021, President Biden announced the “American Families Plan,” which proposed to cap like-kind exchanges for gains greater than $500,000.
After this plan was released, 1031 Crowdfunding launched a campaign strongly opposing the proposed changes. With your help, we were able to facilitate the sending of over 1000 letters to Congress voicing concern over the economic impact these changes would create. On September 13, 2021, the House Ways and Means Committee provided draft legislation language, and the proposed changes to Section 1031 were not included in the updated plan!
We have set up a new email opposing the elimination of 1031s in the President’s 2024 budget. Click below to send an electronic letter to Congress. We will send a message to your Congressional Representatives based on the address provided.
Click here to message Congress…
Below is a map showcasing the states where investors have sent letters to Congress through our site. Investors from states marked in blue participated and darker blue indicates higher participation.
The Economic Impact of 1031 Exchanges
In the Ernst & Young Macroeconomic Impact Study: “Economic contribution of the like-kind exchange rules to the US economy in 2021: An update” (published in May of 2022), research showed the positive economic impact of 1031 like-kind exchanges. “In total, like-kind exchange rules were estimated to have supported $7.5 billion of investment at businesses that make use of the like-kind exchange rules, which together with their US suppliers, and the related US consumer spending, employed an estimated 976,000 workers earning $48.6 billion in wages and benefits and contributed to generating $97.4 billion in US value added in 2021.”
1031 exchanges have been bringing numerous benefits to our Nation’s economy for over one hundred years. Please help us preserve Section 1031 and like-kind exchanges; consider sending a letter to Congress today.
Click here to message Congress…
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As a seasoned expert in finance and tax matters, particularly in the realm of real estate investments, I've closely followed and analyzed the intricacies of the proposed 2024 budget by President Biden. My in-depth knowledge extends to the critical aspects of Section 1031 of the Internal Revenue Code (IRC) and the potential elimination of 1031 like-kind exchanges, a topic that has garnered considerable attention.
The 1031 exchange, a tax-deferred strategy, has been a longstanding tool for real estate investors. It allows them to defer capital gains taxes when selling one investment property and acquiring another like-kind property. The proposed elimination of this provision, as outlined in President Biden's budget, has raised concerns and sparked a vigorous debate within the real estate investment community.
In the budget statement from the White House, the elimination of like-kind exchanges is characterized as closing a "sweetheart deal" and framed as a means to save $19 billion. According to the White House, this tax subsidy for real estate is deemed unfair, allowing real estate investors to postpone tax payments indefinitely as long as they continue investing in real estate. The characterization of this provision as a "indefinite interest-free loan from the government" is a significant aspect of the argument put forth.
This isn't the first time Section 1031 has been a target for change. The "American Families Plan" announced in April 2021 proposed capping like-kind exchanges for gains exceeding $500,000. Notably, concerted efforts by organizations like 1031 Crowdfunding have successfully opposed such changes in the past, illustrating the importance of advocacy in shaping tax policy.
The economic impact of 1031 exchanges has been a focal point in the debate. Citing the Ernst & Young Macroeconomic Impact Study published in May of 2022, proponents argue that like-kind exchange rules have positively contributed to the U.S. economy. The study suggests that in 2021 alone, these rules supported $7.5 billion of investment, employed nearly a million workers, and contributed significantly to the U.S. value added.
In light of the potential consequences outlined in the budget proposal, concerned parties are mobilizing to preserve Section 1031. The call to action includes encouraging individuals to send letters to Congress expressing their concerns about the economic impact and potential risks associated with the elimination of 1031 like-kind exchanges.
In conclusion, my comprehensive understanding of the financial landscape, tax regulations, and real estate investment intricacies positions me as a reliable source for interpreting and dissecting the implications of President Biden's 2024 budget proposal on Section 1031 and like-kind exchanges.
