Section 1031 of the Internal Revenue Code
The legal way to defer your entire tax bill when you sell.
A 1031 exchange lets you roll the proceeds from selling one investment property into another — without paying federal capital gains, state income tax, or depreciation recapture at closing. The tax doesn't disappear; it's deferred. Done right, it can be deferred for the rest of your life.
In plain English
You sell a rental. You buy another. The IRS waits.
Section 1031 of the tax code says: if you sell an investment property and reinvest all of the proceeds into another investment property of equal or greater value, you don't owe tax on the gain yet. You roll forward your original cost basis into the new property.
When you eventually sell the new property — if you ever do — you can do another 1031 and keep deferring. Some investors do this five, six, ten times. Many never pay the tax at all.
There's no limit on how many exchanges you can do or how much you can defer. There are strict timelines and rules — the rest of this page explains them.
By the numbers
The clock starts at closing
The two deadlines that matter most.
From the day you close on the sale of your old property, the IRS gives you 45 days to identify what you're buying and 180 days to close on it. Miss either deadline and the exchange fails — you owe the full tax bill.
You sell Day 180
Must close on replacement
Sale closes
Your sale proceeds go directly to a qualified intermediary — they never touch your hands. (If they do, the exchange is invalid.)
Identification
You must formally identify up to three replacement properties in writing. No extensions, no exceptions.
Close on replacement
You must close on one or more of the properties you identified. The exchange is complete.
The rules — explained
Four things you need to get right.
Like-kind property
For real estate, "like-kind" is interpreted broadly. A single-family rental can exchange for a strip mall. An apartment building for raw land. The only rule: both have to be held for investment or business use. Your primary home does not qualify.
Equal or greater value
Your replacement property must be worth at least as much as your sale price (net of selling costs). If it's worth less, the difference — called "boot" — is taxable. If it's worth more, you can add cash to make up the gap.
A qualified intermediary
You can't touch the proceeds — not for a minute. A qualified intermediary (QI) holds the funds between sale and purchase. We open the QI account before your sale closes and coordinate the rest. Start with us.
Same taxpayer on title
Whoever sold the old property must be the same legal entity that buys the new one. Same name, same LLC, same trust. Changes mid-exchange break the chain of ownership and the deferral.
How Landlords.com handles your exchange
You sell. We do the rest.
We open your exchange.
Before your sale closes, we set up your qualified intermediary account. Funds flow directly from buyer to QI — never through your hands.
We help you identify.
Inside the 45-day window, we work with you (and your buyer broker, if you want one) to identify replacement property options. Active 1031, DST, or both.
We coordinate the close.
QI releases funds to the closing of your replacement property. The exchange is recorded. The deferral is locked in. You get your closing statement.
Common questions
What landlords ask us most.
If you don't see your question here, talk to an advisor. There's no charge for the conversation.
Ask an advisorWhat if I can't find a replacement property in 45 days?
Can I do a 1031 on a property I've been renting to family?
What if my replacement property is cheaper than what I sold?
Do I need to use a 1031 for the full sale price, or just the gain?
What does Landlords.com charge?
What happens if I die owning the new property?
What investors typically 1031 into.
Any of these qualify as like-kind under §1031. The right answer depends on whether you want to stay active or finally go passive.
Thinking about a 1031? Talk to someone who's done a thousand.
Free 30-minute call with a real estate investment specialist. We hold no securities, place no offerings — we just connect you with the right person before your closing window opens.