What are the benefits of a 1031 exchange versus selling an investment property outright?

A 1031 exchange allows investors to defer capital gains taxes and reinvest 100% of their proceeds. Selling an investment property outright may make sense in cases where liquidity is needed, but it results in immediate tax consequences and less capital for reinvestment.

Key benefits of a 1031 exchange include:

Tax deferral: Avoid paying capital gains taxes upfront, keeping more money invested.
More capital for growth: Reinvest the full sale amount instead of losing 20% to 30% to taxes.
Portfolio flexibility: Upgrade, diversify or consolidate properties to fit investment goals.
Estate planning: Heirs can inherit property with a stepped-up basis, potentially eliminating capital gains taxes.