Depreciation after 1031 exchange

[Horacio Gutierrez]

Hello,

1. If I do a 1031 exchange on the rental property I buy will I be able depreciate for another 27.9 years?

2. If I sell my property and I dis 1031 exchange properties before will I have to pay depreciation on all 3 rental properties I owned or only the last home I sold?

[Dave Foster]

@Horacio Gutierrez The capital gains and depreciation of your previous 1031s do not go away.  They are deferred into the newest property.  this is done when your accountant files the form 8824 which transfers the basis of the old property into the new property.  So like @Bill B. said - It's kind of like you'll only pay the capital gains on the sale of the last rental.  But the basis of the last rental already includes all of the past gain and depreciation from the others.  

Four ways to get rid of that gain.

1. Die - the property goes to your heirs at a stepped up basis so they get it tax free.  Sucks to be you but it's great for them.

2. Keep 1031ing every time you sell.  This way the tax stays deferred indefinitely.  You get the income generated  from the deferred tax and any amount you buy more than you sold adds to your depreciable basis.  Then see #1.

3. Do a 1031 into a really nice investment property that later you convert into a primary residence.  Live there until once again see #1.

4. 1031 into passive NNN commercial or fractional passive real estate that becomes your retirement plan until.....Yep see #1.

You can live tax deferred but you gotta die to be tax free!