Depreciation taxed avoidance ?

[Jerome Ramirez Guerrero]

Can depreciation taxes be avoided by performing a 1031 exchange? 

Thank you,

[Kevin Sobilo]

@Jerome Ramirez Guerrero, depreciation is the deduction on your taxes each year for your property's theoretical loss in value. So, it is a tax savings.

However, this reduces your tax basis each year.

For example if you bought a property for $100k and depreciated $5k on your taxes over a couple years and then sold the property for $200k, your profit aka capital gain would be $105k because your tax basis would have been reduced from $100k to $95k based on the depreciation.

You can use a 1031 exchange to DEFER paying tax on that capital gain, but it is just kicking the can down the road, if you ever sell you will have to recapture all the capital gain. My intention is to do 1031 exchanges and never sell my investments. My heirs will not have to pay taxes on my gains!