1031: seller credits and closing costs

[Christian Luong]

Hi everyone,

I plan to sell a house and do a 1031. Are there any tips to avoid out of pocket expenses? Ideally I'd like to find ways to pay for expenses without having to pay from my own

- $12K roof repair before selling: looks like I cannot use the proceeds to pay that off or else it will count as a boot. Am I right?

- buyer asks for a $10K seller credit - will it be taxable and part of the boot?

Thanks

[Dave Foster]

@Christian Luong, Costs on the settlement statement can be tricky.  In general only costs to purchase the property are eligible for tax deferral in the 1031.  Many prepaid expenses and costs of financing are not.  But there's no definitive list.  Here's an article we wrote for the BP blog that may help - https://www.biggerpockets.com/...