Tax & LegalQuestion 64
Can I Do a Cash-Out Refinance and Then Do a 1031 Exchange?
Yes, but timing matters. Do the cash-out refinance well before the sale (6+ months) to avoid IRS scrutiny of extracting equity before a tax-deferred exchange.
Yes, but timing matters. Do the cash-out refinance well before the sale (6+ months) to avoid IRS scrutiny of extracting equity before a tax-deferred exchange.
- What to know: Understand how cash-out refinancing interacts with your tax obligations and legal structure as a Houston landlord.
- Houston context: Texas has no state income tax and fewer cash-out restrictions on investment properties compared to homesteads, giving Houston landlords more flexibility.
- Action step: Consult a Texas-savvy CPA and real estate attorney before your first cash-out refinance to optimize the tax treatment and legal structure.
Bottom Line
Cash-out refinance proceeds are not taxable income — this makes it one of the most tax-efficient ways to access your Houston property equity.