Virginia business owners and real estate investors who understand the benefits of a 1031 exchange can acquire better performing properties and defer paying capital gain taxes. Since 1921, IRC Section 1031 allows property owners to defer capital gain taxes when real property held for investment or used in a business is exchanged for other “like-kind” real property. Taxes which would otherwise be due in a taxable sale are deferred until property is sold for cash at a later time. Essentially, a 1031 exchange provides property owners an interest-free loan that can be used over and over to exchange into better performing investment properties and build equity. Via a 1031 exchange, property owners can defer up to four levels of taxation including depreciation recapture at 25%, federal capital gains at 15% or 20%, Virginia state taxes of 5.75% and the 3.8% Net Investment Income Tax, when applicable.