1031 exchange when you sell investment property
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A 1031 exchange lets you sell investment or business real estate and put the proceeds into another property without paying tax on the gain now. The tax is deferred, not forgiven, but deferring it can let the full amount keep working for years.
The rules are strict and the deadlines don't bend: a qualified intermediary has to hold the money, you have 45 days to name the replacement property and 180 days to close.
How it works
Sell investment or business real estate and buy more, and the gain isn’t taxed now. Reinvest the full sale price and replace the debt to defer all of it.
What makes it hold up
- A qualified intermediary holding the money (you can’t touch it)
- Replacement property named within 45 days
- The purchase closed within 180 days
Risks
Low if the deadlines are met; missing either makes the whole gain taxable. Cash taken out is taxed. Only real estate qualifies, and not your home.
Questions to ask your CPA
- Can I find a replacement within 45 days?
- Would a Delaware statutory trust work as a backup?
Common questions
What property qualifies?
Real estate held for investment or business use, exchanged for other real estate held the same way. Your own home doesn't qualify, and since 2018 equipment and other personal property don't either.
Do I have to reinvest everything?
To defer all of the tax, reinvest the full sale price and take on at least as much debt as you paid off. Any cash you take out, or debt you don't replace, is taxed.
What if I can't find a property in 45 days?
Missing the deadline makes the whole gain taxable. Many owners name a Delaware statutory trust as a backup, since it can be bought quickly.
Does the depreciation get taxed?
The tax on depreciation you've taken is deferred along with the gain and carries into the new property.
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Education, not advice. Tax law changes and every situation is different, so confirm the details with your CPA or tax advisor before acting. This page was last checked against tax law as of October 2026, including the 2025 tax law, in October 2026.