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Liz Weston

Q&A: How a ‘like-kind’ 1031 exchange can help you defer real estate capital gains taxes

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Dear Liz: My husband and I are selling a commercial property for $600,000 and we have capital gains questions. Our Realtor said that we have 90 days to buy another property but suggested we don’t make a purchase due to the state of the economy at this time. We are looking for any suggestions to lessen our capital gains. Do you have any suggestions that we could look into or articles to read?

Answer: Your Realtor is referring to what’s known as a “like-kind” or Section 1031 exchange. These exchanges allow people to defer capital gains taxes when they sell commercial, rental or investment real estate as long as the proceeds are used to purchase similar property.

Section 1031 exchanges happen all the time, in all sorts of economic conditions, so your Realtor’s attempt to dissuade you based on “the state of the economy” is a bit odd. Also, like-kind exchanges don’t have to be completed in 90 days. Owners have 45 days to identify potential replacement properties and a total of 180 days to complete the transaction. There are a number of other rules you must follow, so you’ll want to use companies known as exchange facilitators that specialize in handling these transactions.

Your first step, though, should be finding a qualified tax professional. You’ve just experienced what can happen when you turn to non-tax professionals for tax advice.

While your desire to educate yourself is laudable, and you certainly can find books about taxes at your local bookstore, there’s no substitute for consulting an experienced tax pro who can give you personalized advice.

Thursday’s need-to-know money news

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Today’s top story: How to buy stuff that lasts. Also in the news: A new episode of the Smart Money podcast on how to build the right team, positive signs for college enrollment, and the most creative ways to use the equity in your home.

How to Buy Stuff That Lasts
Savvy consumers consider price, performance and reliability when making a major purchase, such as a car or home appliance.

Smart Money Podcast: Nerdy Business: Building the Right Team
This week, we talk with a business owner about how she launched her IT consulting business, the way she learned to choose the right partners and what her exit strategy is.

A Positive Sign for College Enrollment — Finally
After a two-year slump in college enrollment, there’s at least one early indicator of a reversal ahead: Financial aid application submissions are up.

The Most Creative Ways to Use the Equity In Your House
To start with, you can actually use a HELOC to pay off your existing mortgage.

Wednesday’s need-to-know money news

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Today’s top story: 12 ways to make this summer’s travel less bad. Also in the news: Are Airbnbs really cheaper for large groups, 11 ways to repurpose an old phone or tablet, and the federal consumer finance watchdog to tighten bank rules around money-transfer scams.

12 Ways to Make This Summer’s Travel Less Bad
With proper planning and an adaptable mindset, you can weather the storm that is travel in summer 2022.

Are Airbnbs Really Cheaper for Large Groups?
You can turn to Airbnb for a large group getaway, but always do the math to make sure you’re getting the best deal.

11 Ways to Repurpose an Old Phone or Tablet
You should put your old smartphone or tablet to work.

Federal consumer finance watchdog to tighten bank rules around money-transfer scams, report says
Banks generally don’t have liability in instances when the transaction is authorized.

How to buy stuff that lasts

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Savvy consumers consider price, performance and reliability when making a major purchase, such as a car or home appliance. The greatest of these is reliability — particularly lately.

Supply chain disruptions can mean long waits for parts or replacements if something breaks. Getting a new refrigerator, dishwasher or other major appliance now often takes weeks or even months, says Paul Hope, home and appliances writer for Consumer Reports. Plus, the microchip shortage means many manufacturers prioritize making their most expensive models, which are typically the most profitable, Hope says.

“It’s getting increasingly difficult to get some of the inexpensive models of any given product,” Hope says.

In my latest for the Associated Press, how to find truly reliable and durable products.

Monday’s need-to-know money news

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Today’s top story: How to afford big-ticket items for the year. Also in the news: A new episode of the Smart Money podcast on summer travel tips and conflicting financial priorities, how a Burbank teacher got their student loans forgiven, and 4 smart ways to teach kids about saving money.

How to Afford Big-Ticket Items for the Year
If you need to make a big purchase this year, such as furniture or an appliance, plan around sales and your budget.

Smart Money Podcast: Summer Travel Tips and Conflicting Financial Priorities
This week’s episode starts with a discussion about summer travel: how to manage costs, stay safe and prepare for the possibility of flight cancellations.

How I Got My Student Loans Forgiven: Teacher in Burbank, California
A fraught program gets temporary improvements.

4 Smart Ways to Teach Kids About Saving Money
Kids can learn to save by talking about money, securing a strong savings account and setting trackable goals.

Q&A: How to avoid Medicare late enrollment penalties

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Dear Liz: I am 65, still working and have health insurance through my employer. I have not enrolled for Medicare and have been told I do not need to. I plan to once I retire. There is a passage in my Social Security statement that says, “Because you are already 65 or older, you should contact Social Security to enroll in Medicare. You may be subject to a lifetime late enrollment penalty. Special rules may apply if you are covered by certain group health plans through work.” I have tried to research further through the Medicare website but can’t find a clear answer about whether or not I am OK not enrolling at this time.

Answer: If your employer has 20 or more employees, then you’re fine for now. When you stop working for that employer, you’ll have eight months to sign up for Medicare without owing penalties.

If you want your Medicare coverage to start when your job-based coverage ends, though, you should sign up a month before you retire. Similar rules would apply if you were covered by a spouse’s workplace health insurance plan. As long as your spouse is still working for the employer that provides the coverage, you can avoid permanent Medicare penalties.

If your employer has fewer than 20 employees, however, you may be required to sign up for Medicare when you’re first eligible. Check with your employer.