I recently had a discussion with an amazing 1031 Exchange expert, Brigitte Echave (she talks terms even I can understand!) about the pros and cons of doing exchanges. One factor that I had missed when attending classes on 1031s before is the fact that whether or not someone takes the tax deduction for depreciation on investment property...the IRS figures you did, and wants to recoup it...and it is charged before Capital Gains is applied!
So, in Arizona, home to a lot of investment and vacation homes, your Gain will be charged 25% depreciation recovery, then Uncle Sam wants 15% Capital Gains tax, and Aunt Arizona gets 5%. I'm no tax advisor, but highly recommend anyone looking to sell investment property have a good talk with one - as well as with a 1031 Exchange specialist.
I can recommend one to you - she uses small words to explain the big ones so that I can understand:
Brigitte Echave of Leverage Exchange is someone that I value & respect very highly. Click on the logo to learn more about her company & what they can do for you...anywhere in the U.S.