1031 Exchanges for Rental Property: The 45-Day and 180-Day Rules
How a 1031 like-kind exchange defers tax on selling a rental: real property only since 2018, the 45-day and 180-day deadlines, boot and related parties.
By Seayora Editorial Team · Published · Facts checked · 3 min read
Short answer: Under section 1031, exchanging business or investment real property for other real property of a like kind defers the gain. Since 2018 it applies only to real property, not to equipment or other personal property, and never to property held primarily for sale. In a deferred exchange the replacement property must be identified in writing within 45 days and received within 180 days, or by the due date of your return if earlier. Cash or other property received, called boot, is taxable.
Key takeaways
- Both properties must be real property held for business or investment, and of a like kind.
- Identify the replacement in writing within 45 days; receive it within 180 days or by your return’s due date.
- Cash and other non-like-kind property received are taxed up to the gain; losses are not recognized.
- An exchange is reported on Form 8824, and exchanges with related parties have extra rules.
What is a 1031 exchange?
If you exchange real property used for business or held as an investment solely for other business or investment property of a like kind, you generally do not recognize a gain or loss (IRS, Like-kind exchanges). Properties are of like kind if they are of the same nature or character, even if they differ in grade or quality, so an apartment building can generally be exchanged for land or a commercial building.
What property qualifies?
- Since January 1, 2018, only real property qualifies. Machinery, equipment, vehicles, artwork and intangible assets do not.
- Real property held primarily for sale, such as a property bought to flip, does not qualify.
- A home used solely as your personal residence does not qualify, although the separate home-sale exclusion may apply.
- Personal property incidental to the real property, such as furniture, is disregarded if it is typically transferred with the real property and is worth no more than 15% of the replacement real property.
What are the deadlines in a deferred exchange?
In a deferred exchange, the replacement property must be identified within 45 days after you transfer the property you give up, and received within 180 days, or by the due date of your tax return including extensions, whichever is earlier (Instructions for Form 8824). The identification must be in writing, signed by you, and describe the property clearly, for example by legal description or street address, and be delivered to a party to the exchange who is not a disqualified person.
Most deferred exchanges use a qualified intermediary to hold the sale proceeds. Your agent or a related party cannot serve as one. If the timing requirements are missed, even because of the intermediary, the transaction does not qualify and the gain may be taxable in the year of the sale.
What is boot, and is it taxable?
If you also receive money or other property that is not like-kind, you recognize gain up to the amount of that money and property. A loss is never recognized in a like-kind exchange. Liabilities count too: the Form 8824 instructions show how mortgages assumed by each side are netted against each other.
How is an exchange reported?
File Form 8824 with your return for the year you transferred the property you gave up. Exchanges with related parties, including family members and related entities, have special rules, and Form 8824 must also be filed for the two years after such an exchange. An exchange structured to avoid the related-party rules is treated as a sale.
Frequently asked questions
Can I exchange a rental house for a vacation home?
Only real property held for business or investment qualifies on both sides. A home used solely for personal purposes does not.
What happens if I miss the 45-day deadline?
The replacement property must be identified within 45 days. If it is not, the transaction does not qualify as a deferred like-kind exchange and the gain may be taxable.
Can my brother act as my qualified intermediary?
No. Related parties and your agents are disqualified persons and cannot serve as a qualified intermediary.
Sources
- Like-kind exchanges – Real estate tax tips, Internal Revenue Service
- Instructions for Form 8824 (2025), Like-Kind Exchanges, Internal Revenue Service
How Seayora helps
Property management accounting: Separate books per property and entity, so the basis and history of each rental are on hand when it is sold or exchanged.
This article is general information, not tax advice. Tax rules change and your situation is your own, so confirm the treatment with a CPA or enrolled agent before you file.
How we write and check these guides: editorial standards.
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