What Is a 1031 Exchange?

Short answer

A 1031 exchange lets an investor sell real estate held for business or investment and defer the gain by buying like-kind real estate, under Section 1031 of the tax code. Per IRS instructions, you must identify the replacement property in writing within 45 days of selling and receive it within 180 days or by your tax return due date, whichever comes first (as of November 2026).

Definition

A tax-deferral rule for swapping one investment or business real property for another of like kind. Tax is postponed, not erased, and your own home does not qualify.

Worked example

Example only, not tax advice: an investor closes the sale of a rental condo in Miami on March 1, and the money goes to a qualified intermediary, not to her. Day 45 is April 15, so by then she must sign a written identification of the replacement property. Day 180 is August 28, the deadline to close, unless her tax return due date comes first. She buys a duplex in Hialeah with a DSCR loan, a business-purpose loan that qualifies on the property's rent. If she takes cash out of the exchange, or her new mortgage is smaller than the old one, that difference is "boot" and may be taxable.

IRS rules investors trip over

From the IRS Form 8824 instructions, as of November 2026:

• Real property only. Since 2018, Section 1031 does not apply to personal property, and property held mainly for sale (like flips) does not qualify.
• 45 days to identify, in a signed writing that clearly describes the property.
• 180 days to close, or your return due date with extensions, whichever is earlier. A sale late in the year may need an extension to get the full 180 days.
• Qualified intermediary. Related parties and your agents can't serve as one. If the intermediary makes you miss a deadline, the gain may be taxable.
• Boot. Cash or net debt relief you receive is taxable up to the gain.
• Related parties. If either side sells within 2 years, the deferred gain is generally reported then.
• File Form 8824 with your return for the year of the exchange.

Financing the replacement property

The 180-day clock leaves little room for a slow loan, so get pre-qualified before you list. Investors often use DSCR loans or bank statement loans for the replacement; see DSCR requirements in Florida. QMS is a mortgage broker, not a tax advisor or qualified intermediary: confirm your exchange with a CPA or tax attorney. Rates vary daily; call 305-425-1990 for today's pricing.

In South Florida

Per the Florida Department of Revenue, Florida has no income tax for individuals and so no state capital gains tax for individuals, so for most Florida investors a 1031 exchange is about deferring federal tax. Florida transfer costs still apply on each closing, such as documentary stamp tax on the new mortgage. South Florida investors often sell condos and buy rentals elsewhere in the state; just remember U.S. and foreign real estate are not like-kind.