One of the new rules under the Tax Cuts and Jobs Act (TCJA), that is effective for 2018 going forward, concerns 1031 exchanges, or more specifically, the trade-in of vehicles and equipment.

Under the prior tax law, trade-ins deferred the tax on any gain from the disposition of the vehicle or equipment.  By deferring any gain, the tax basis of the new equipment was reduced by the deferred gain.

Under the NEW TAX LAW, 1031 exchanges are only allowed for real estate. Trade-ins of vehicles or equipment will be treated as a sale and any gain on the transaction will be recorded in the year of trade.  This may not be all bad, as you may have the ability to use the special (bonus) depreciation and/or Section 179 rules to expense the new vehicle or equipment at a much faster rate or even all in the year of purchase.