Before You Do a 1031 Exchange, Know Your Next Move

Quick answer: A properly structured 1031 exchange may let an investor defer certain capital gains taxes when selling investment real estate and buying like-kind replacement property. But strict deadlines and qualification rules apply, and rushing into the wrong replacement property can create problems long after closing. Build your replacement strategy before you sell, and work with a qualified intermediary and tax advisor.

Two decisions, not one

Selling the relinquished property is the first decision. Choosing what to buy next is the second, and often the harder one. Under federal rules, investors generally have 45 days after the sale to identify replacement property and 180 days to close. That timeline leaves little room to start searching from scratch.

Before you list your investment property

• Clarify your goals: more cash flow, less management, diversification, or a legacy asset?
• Define replacement criteria: property type, market, price range and financing.
• Understand the rules: like-kind requirements, debt replacement and the role of a qualified intermediary.
• Line up your team: a qualified intermediary, a CPA or tax advisor, and a lender.
• Start looking at replacement options before your sale closes.

Common mistakes to avoid

Taking receipt of sale proceeds, missing identification deadlines, overpaying for a replacement property because of time pressure, and failing to replace debt can all reduce or eliminate the benefit. We do not provide tax or legal advice. Your exchange should be coordinated with qualified professionals.

Frequently asked questions

Can I do a 1031 exchange on my primary residence?

Generally no. 1031 exchanges apply to property held for investment or business use. Other tax rules may apply to a primary residence, so ask your tax advisor.

Before you exchange, know your next move.

Build Your Strategy Before You Decide

Capital & Influence is a real estate brokerage that turns real estate into real impact. Through our Real Estate Strategy Center, we start with a complimentary 15-minute Discovery Call, then a paid Strategy Session that delivers a Market Report, Asset Valuation and personalized plan. You pay for the strategy you receive. If you later choose to list or buy with us, that representation agreement is negotiated separately, after we agree on the plan.

Every transaction also moves the Kingdom forward: we give back to our community partners across the Foothills.

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