A 1031 Exchange (named after IRS Code Section 1031) lets you sell a rental or investment property and defer paying capital gains taxes — as long as you reinvest the proceeds into another “like-kind” investment property. Instead of paying a big tax bill now, you roll your profit forward to grow your portfolio.

For real estate, “like-kind” is pretty broad. You can swap:

• A single-family rental for a duplex.
• A commercial building for a piece of raw land.
  A condo for an apartment building.

As long as both properties are held for investment or business use — not as your primary home — they usually qualify.

Potentially all of it. If you follow the rules, you defer:

• Capital gains tax on your profit.
• Depreciation recapture tax on the deductions you took while owning it.

Depending on how much your property has appreciated, this can save you tens of thousands — or hundreds of thousands — today.

Timing is strict:

1️⃣ You have 45 days from the sale of your property to formally identify replacement property/properties in writing.
2️⃣ You have 180 days total to close on the new property.

Miss either date and the whole deal fails — and your full gain becomes taxable. No extensions. No excuses.

No — that’s the catch. You can’t touch the cash. The IRS requires you to use a Qualified Intermediary (QI). They hold the sale proceeds, handle the paperwork, and transfer the funds directly to buy your new property.

If you pocket the cash, it’s taxable — the whole point is that you don’t.

Yes — but you’ll pay taxes on any money you don’t reinvest. For example, if you sell for $500,000 but only reinvest $400,000, the leftover $100,000 (“boot”) is taxable gain.

To defer all taxes, you need to buy replacement property of equal or greater value and reinvest all the proceeds.

Basically, yes — but that’s the point. You defer taxes as long as you keep exchanging. Many investors do multiple 1031s in their lifetime, building bigger portfolios tax-deferred.

When you die, your heirs get a stepped-up basis — often wiping out the deferred gains entirely. It’s one of the strongest real estate tax moves out there.

• Missing deadlines — 45 and 180 days are strict.
• Touching the sale proceeds directly.
• Buying a replacement property that doesn’t qualify.
• Using it for your primary home or second home (doesn’t work).

The IRS doesn’t give do-overs. Using an experienced QI and a tax pro is non-negotiable.