1031 Exchange Rules and Timeline: What the IRS Requires

What does "like-kind" mean after the 2017 tax law?

Since January 1, 2018, only real property qualifies. The Tax Cuts and Jobs Act rewrote §1031(a)(1) so that it covers "real property held for productive use in a trade or business or for investment," and it applies to exchanges completed after December 31, 2017. Before that, people exchanged airplanes, equipment, artwork and franchise licenses. That door is closed.

Inside real property, "like-kind" is broad. The test is the nature of the property, not its grade or quality. Raw land, a strip center, a rented condo, a warehouse, farmland, a ground lease with 30 or more years remaining, and a fractional interest in a building held as a tenant in common can all be exchanged for one another. You can sell a fourplex and buy a medical office building. You can sell farmland in the Central Valley and buy a net-leased pharmacy in Ohio.

The final regulations Treasury issued in 2020 (Treas. Reg. §1.1031(a)-3) define real property as land, improvements to land, unsevered natural products of land, and water and air space. Buildings and their structural components count. Things that look like real estate but are personal property do not: furniture, a hotel's linens, a restaurant's movable kitchen equipment. Intangibles like stock, partnership interests and notes are not real property, which matters a great deal for people who own real estate through a partnership (more on that below).

There are two firm boundaries:

• U.S. and foreign real property are not like-kind. Section 1031(h) says so directly. You can exchange a rental in Portugal for a rental in Spain, but not for a rental in Phoenix.
• Property held primarily for sale doesn't qualify at all. That covers inventory and dealer property: lots a developer subdivides and sells, or houses a flipper buys to resell. Section 1031(a)(2) excludes them.

What counts as "held for investment or business use"?

Both the property you sell (the relinquished property) and the property you buy (the replacement property) have to be held for productive use in a trade or business or for investment. Your intent at the time of the exchange is what matters, and the IRS judges intent by what you actually did.

The statute has no minimum holding period. You will hear "one year" or "two years" quoted as if they were rules. They aren't, though they're reasonable guideposts because they show intent. The only bright-line number the IRS has published is in Rev. Proc. 2008-16, which is a safe harbor for vacation homes and other dwelling units: own the property for 24 months on each side of the exchange, rent it at fair rent for at least 14 days in each of those 12-month periods, and keep personal use to the greater of 14 days or 10% of the days rented. Meet that and the IRS won't challenge the investment intent.

Some properties that do not qualify, and that I see people try:

• Your primary residence. It can qualify for the separate §121 exclusion, and a house that was both home and rental can sometimes use both sections (Rev. Proc. 2005-14 covers that combination), but a straight home-for-rental swap isn't a 1031.
• A second home you use and never rent.
• Property you bought planning to fix and flip.
• Property you acquire in the exchange and immediately move into, or immediately hand to your kids.

The edge cases get harder when property changes use. A rental you converted from your old home, or a replacement rental you later convert to your residence, can work, but the timing and the paper trail need care. If you later sell a home that was acquired in a 1031 exchange, §121(d)(10) requires you to have owned it for five years before you can use the home-sale exclusion.

What are the 45-day and 180-day deadlines?

Section 1031(a)(3) sets two clocks that both start the day after you transfer the relinquished property, usually the day the sale closes and records.

The identification period ends at midnight on the 45th day. By then you must identify your potential replacement properties in a signed writing delivered to someone involved in the exchange who is not your agent, in practice your qualified intermediary. The identification rules (three properties, 200%, 95%) are their own topic, and I cover them in detail in the identification rules guide.

The exchange period ends on the earlier of two dates:

1. The 180th day after the transfer, or
2. The due date, including extensions, of your federal income tax return for the year in which you transferred the relinquished property.

The periods run at the same time, not back to back. You get 180 days total, not 45 plus 180. Both are calendar days, and weekends and holidays count. If day 45 falls on a Sunday, your deadline is that Sunday, not Monday. Close on October 1, 2026, and your identification deadline is Sunday, November 15, 2026.

If you sell more than one relinquished property as part of the same exchange, the clocks start with the first transfer. People who sell two buildings a few weeks apart and assume each sale gets its own clock are often surprised.

The tax-return trap

The phrase "or the due date of your return" catches people every year. Say you're an individual on a calendar year and you close the sale of your relinquished property on November 13, 2026. Day 180 is May 12, 2027. But your 2026 Form 1040 is due April 15, 2027. Unless you extend your return, your exchange period ends on April 15, which is day 153. If you haven't closed on your replacement by then, the exchange fails, even though you thought you had until May.

The fix is simple and cheap: file an extension (Form 4868 for individuals) before April 15. That pushes your return due date to October 15, so the 180-day date controls again. Your CPA has to know you're in an open exchange. I'd make that call the week you close, not in March.

This affects any sale closing roughly after mid-October for a calendar-year individual. Corporations, partnerships and trusts have their own return due dates, so the window that triggers the trap differs by entity.

Can you get an extension?

No, with one exception. The IRS does not grant extensions for a buyer who backed out, a lender who was slow, a title problem, or a family emergency. The deadlines are written into the statute.

The exception is a federally declared disaster where the IRS issues relief. Under Rev. Proc. 2018-58, section 17, when the IRS publishes a disaster relief notice, an affected taxpayer's 45-day and 180-day deadlines that fall within the relief window can be pushed out by 120 days or to the end of the general postponement period, whichever is later. The postponement can't run past one year or past the due date (with extensions) of the tax return for the year of the transfer. Some taxpayers outside the disaster area can qualify too, for example if the replacement property is in the disaster area, or if the lender or title insurer can't close because of the disaster.

Three practical points. First, a FEMA declaration alone doesn't postpone anything; the trigger is the IRS notice. Second, the relinquished property generally must have been transferred on or before the disaster date. Third, you should tell your qualified intermediary in writing that you're relying on disaster relief and what you believe the new dates are, because the QI holds your money under an exchange agreement written around the original dates.

Why do you need a qualified intermediary?

Because of constructive receipt. If you have the sale proceeds in hand, or could get them on demand, the IRS treats you as having sold the property for cash, and the exchange fails. That's true even if you never actually spend the money. It's also true if your own attorney, CPA or real estate agent holds the money for you, because they are your agents.

The regulations (Treas. Reg. §1.1031(k)-1(g)) give several safe harbors that keep you out of constructive receipt. The qualified intermediary safe harbor is the one nearly everyone uses. The QI enters a written exchange agreement with you, takes an assignment of your rights in the sale contract, receives the proceeds at closing, and later uses them to acquire the replacement property for you. Your buyer and seller get written notice of the assignment. Title usually goes directly from you to your buyer and from your seller to you; the QI doesn't need to take title.

The exchange agreement must restrict your access to the money. Under §1.1031(k)-1(g)(6), you generally can't receive, pledge or borrow against the funds before the end of the exchange period, with narrow exceptions: if you identify nothing by day 45, the agreement can release the money after day 45; if you identify property, it can be released once you've acquired everything you're entitled to, or after a material contingency outside your control occurs. Anything looser than that can blow up the exchange.

Who can't be your QI?

A "disqualified person" can't serve. That includes anyone who has acted as your agent in the two years before the sale, such as your employee, attorney, accountant, investment banker or broker, or real estate agent, and people related to you or to those agents. There are exceptions for banks, title companies and escrow companies providing routine services, and for someone who has only provided exchange services. The upshot: your longtime CPA can't hold your money, and neither can the broker who listed your building.

Choosing one

There is no federal licensing of qualified intermediaries. A handful of states regulate them; California, for example, requires a QI to maintain a fidelity bond or keep funds in qualified escrow and to carry errors-and-omissions coverage. QIs have failed in the past, and when they do, exchangers become unsecured creditors and their exchanges usually fail as well. I'd ask any QI where your money will sit (a segregated, named account or a pooled one), whether you need to co-sign withdrawals, what bond and insurance they carry, and who audits them. Interest on the funds is negotiable too.

How much do you have to reinvest to defer all of the tax?

The rule of thumb is two-sided:

1. Buy replacement property worth at least as much as the net sale price of what you sold (the price less normal closing costs).
2. Reinvest all of the net cash from the sale.

If you do both, there's no "boot," and all of the gain is deferred. If you fall short on either, you recognize gain up to the amount of boot you received. Section 1031(b) caps the taxable amount at the lesser of your realized gain or the boot. I go through partial exchanges in detail in the boot guide.

What about the mortgage?

People often hear "you have to replace the debt." That's close but not quite right. When a buyer pays off your loan, the relief of that debt counts as money you received. You offset it by taking on new debt on the replacement property, or by adding cash of your own. The regulations let you net liabilities you assume against liabilities you're relieved of, and cash you add can offset debt relief.

The netting doesn't run the other way. Taking on more debt does not offset cash you pull out of the exchange. If you take $200,000 of cash and buy a bigger building with a bigger loan, the $200,000 is still taxable boot. And if you plan to refinance the replacement property to get cash out, do it after the exchange is complete and with a business reason, not as a pre-planned step built into the purchase; your tax adviser will have a view on how long to wait.

What closing costs can come out of the exchange funds?

Normal transactional costs, such as broker commissions, title insurance, escrow and QI fees, recording fees and transfer taxes, can be paid from exchange funds without creating boot, and they reduce the amount you need to reinvest. Other items paid from the proceeds can create boot: prorated rents credited to your buyer, security deposits you transfer, property tax prorations, and loan costs on the new mortgage (points, appraisal, lender fees). These are handled differently by different tax preparers. I'd ask your CPA to look at the draft settlement statement before closing, when there's still time to bring a check instead.

Worked example: a full exchange, with the numbers

This is a hypothetical, with made-up round numbers, and it does not describe any real client or property.

Say you bought a small industrial building in Sacramento in 2012 for $1,400,000. You've taken $600,000 of depreciation, so your adjusted basis is $800,000. You have a $1,000,000 loan. In November 2026 you sell for $3,000,000 and pay $120,000 in commissions and closing costs.

If you simply sold, here's a rough federal estimate, assuming you're in the top brackets (in 2026 the 20% long-term rate starts at $613,700 of taxable income for married couples filing jointly):

• Unrecaptured §1250 gain (the depreciation): $600,000 × 25% = $150,000
• Remaining long-term gain: $1,480,000 × 20% = $296,000
• Net investment income tax: $2,080,000 × 3.8% = $79,040
• Federal total: about $525,040

California taxes capital gains as ordinary income, with a top rate of 13.3%. At the top rate the state tax on the whole gain would be roughly $276,640, so the combined bill could be roughly $800,000. Your actual figure depends on your other income, deductions and the state's brackets, so treat this as an order of magnitude.

Now the exchange. To defer all of it, you need to buy at least $2,880,000 of replacement property, put all $1,880,000 of cash into it, and cover the $1,000,000 of debt relief with new debt or added cash. Three versions:

Version A: full deferral. You buy a $2,900,000 property with the $1,880,000 of exchange cash and a $1,020,000 loan. Value is up, all cash is reinvested, and new debt exceeds old debt. No boot, nothing taxable now. Your basis in the new building is $2,900,000 minus the $2,080,000 deferred gain, or $820,000. (Check: old basis of $800,000 plus the extra $20,000 of debt you took on.)

Version B: less debt, more of your own cash. You buy the same $2,900,000 property with the $1,880,000 of exchange cash, $220,000 from your savings and an $800,000 loan. Your debt went down by $200,000, but the $220,000 you added offsets it. Still full deferral.

Version C: you trade down. You buy a $2,600,000 property with $1,880,000 of exchange cash and a $720,000 loan. The replacement is worth $280,000 less than your amount realized and your debt went down $280,000 with nothing added to offset it. You'll recognize about $280,000 of gain. Your CPA will work out how it splits between the 25% recapture rate and the 20% rate. The other $1,800,000 of gain stays deferred.

Version C is the pattern I see most often: the debt side is where people get surprised. They reinvest every dollar of cash, feel finished, and then learn the smaller loan created taxable boot.

Timeline at a glance

Here is the same hypothetical sale, closing Friday, November 13, 2026, for a calendar-year individual.

Two things the table shows. The first is how little slack there is around the holidays: December 28 sits in the week when brokers, sellers and lenders are hardest to reach. The second is the April 15 line, which is invisible if you only count days.

Does the same taxpayer have to sell and buy?

Yes. The taxpayer who sells the relinquished property must be the taxpayer who acquires the replacement property. If John Smith sells, John Smith buys. If Smith Holdings LLC (taxed as a partnership) sells, Smith Holdings LLC buys.

The rule is about tax identity, not legal title, which opens a few doors:

• Disregarded entities. A single-member LLC is ignored for federal income tax purposes. You can sell a property you hold personally and take title to the replacement in your single-member LLC, or the reverse, and it's still the same taxpayer. The same goes for a revocable living trust, which is disregarded during your lifetime.
• Married couples. Spouses are separate taxpayers. If both spouses are on title to the relinquished property, both should be on title to the replacement. A transfer between spouses before or after can cause problems; plan the vesting before you sign the purchase contract.
• Delaware statutory trusts. Under Rev. Rul. 2004-86, a beneficial interest in a properly structured DST is treated as a direct interest in the underlying real estate for §1031 purposes. That's why DST interests can serve as replacement property. They are securities, though, with their own risks, which I cover in the DST guide and in the risks section below.

Partnerships and the "drop and swap"

This is where most of the friction is. Many investment properties are owned by an LLC taxed as a partnership, and the partners don't agree on what to do next: one wants to exchange, one wants cash, one wants to exchange into something different. A partnership interest is not real property, so a partner can't exchange their interest in the LLC. The partnership itself can do a single exchange, but it can't split into different exchanges for different partners.

The common workaround is the "drop and swap." Some time before the sale, the partnership distributes undivided tenant-in-common interests in the property to the partners (the "drop"). Each partner then owns a direct interest in real property and can sell it and do their own exchange, or take cash (the "swap"). The variation is the "swap and drop": the partnership exchanges, then later distributes the replacement property.

The problem is the held-for-investment requirement. If the partners receive their TIC interests a week before closing a sale that was already negotiated, the IRS or a state tax agency can argue the partners never held the property for investment; they held it for an immediate sale. Some court cases have gone in taxpayers' favor, and some have not. California's Franchise Tax Board has been active on this point. If you're in a partnership heading toward a sale, the time to plan is a year or more out, not when you have an offer. This is squarely a question for a tax attorney.

Can you exchange with a family member or your own company?

You can, with restrictions. Section 1031(f) says that if you exchange property with a related person, and either of you disposes of the property received within two years after the last transfer, the deferral is lost, and the gain becomes taxable in the year of that later disposition. "Related person" uses the definitions in §267(b) and §707(b)(1): your spouse, children, grandchildren, parents, grandparents and siblings, and corporations or partnerships in which you hold more than 50%, plus various trust relationships. Aunts, uncles, cousins and in-laws are not on the list.

The two-year rule has three exceptions: a disposition after the death of either party, an involuntary conversion (if the threat of condemnation arose after the exchange), and a showing that neither the exchange nor the disposition had tax avoidance as a principal purpose. That last one is hard to prove and I wouldn't plan around it. The two-year clock also stops running while the property's risk of loss is substantially diminished, for example by a put option.

The bigger trap is buying replacement property from a related person. In Rev. Rul. 2002-83, the IRS ruled that a taxpayer who sells low-basis property to an outside buyer through a QI and then buys high-basis replacement property from a related party has structured a transaction to avoid §1031(f), under §1031(f)(4). The related party walks away with cash and recognizes little gain because of its high basis, and the family as a whole has cashed out. The Ninth Circuit reached the same result in Teruya Brothers v. Commissioner (2009). The related-party seller doing its own 1031 exchange can change the analysis, and the IRS has issued private letter rulings on such facts, but those rulings bind only the taxpayers who requested them. As a working rule: selling to a relative can work if you both hold for two years; buying from a relative usually doesn't work unless your tax attorney has a specific reason it does.

The related-party rule also requires you to file Form 8824 for the year of the exchange and for each of the two following years.

How do you report a 1031 exchange?

On IRS Form 8824, filed with your return for the tax year in which you transferred the relinquished property. If you sold in December 2026 and bought in March 2027, it goes on your 2026 return. Form 8824 asks for descriptions of both properties, the dates you transferred, identified and received property, whether a related party was involved, and the figures that calculate recognized gain, deferred gain and the basis of the replacement property. Any recognized gain flows to Schedule D or Form 4797, and any recapture gets its own treatment.

When a deferred exchange spans two tax years and fails, there's a helpful rule. Under §1.1031(k)-1(j)(2), if you had a bona fide intent to do an exchange and used a qualified intermediary, you can generally report the gain under the installment method in the year you actually receive the money. Sell on December 1, 2026, fail to identify by January 15, 2027, receive the funds from the QI in January, and the gain generally belongs on your 2027 return, not your 2026 return. That's not a reason to plan a failed exchange, but it's useful to know if one falls apart.

Keep the exchange agreement, assignment notices, identification letter, both settlement statements and the QI's final accounting. If you're audited, those documents carry the exchange.

What state tax issues should you know about?

Most states with an income tax follow the federal §1031 rules, but a few details trip people up.

Clawback states. California, Massachusetts, Montana and Oregon have rules that let them tax deferred gain later when you exchange out of the state. California's version is the one I see most, and the most formal. If you sell California property and buy replacement property in another state, you must file FTB Form 3840 with California every year you hold the out-of-state replacement property, even if you no longer live in or owe other tax to California. When you eventually sell in a taxable sale, California taxes the portion of the gain that accrued while the property was in California. If you exchange again, the tracking continues.

Withholding at closing. California generally requires withholding of 3 1/3% of the sale price when real property is sold, reported on Form 593. A qualifying like-kind exchange is exempt from withholding at the initial transfer, but if you receive more than $1,500 of boot, the QI must withhold on the boot, and if the exchange fails, the QI must withhold on the sale. Several other states have their own nonresident withholding regimes, each with its own exchange exemption and paperwork. Your escrow officer will usually know the local forms.

Transfer taxes. A 1031 exchange defers income tax. It does nothing about documentary transfer taxes, which are due on both the sale and the purchase. In San Francisco, transfer tax on a large commercial sale is not a rounding error; budget for it.

Common mistakes I see

None of these are exotic. They're the ones I'd check first.

• Closing the sale before hiring a QI. Once the proceeds hit your account or your escrow is closed without an assignment, it's too late. The exchange agreement has to be in place before the relinquished property closes.
• Identifying loosely. "A NNN property in Texas" is not an identification. Street address, legal description or an unambiguous name is.
• Forgetting the debt. Covered above. Replace it with debt or cash.
• Missing the return due date. File the extension.
• Changing title. Sell as a married couple, buy in one spouse's name, or sell from a partnership and buy individually, and you may have broken the same-taxpayer rule.
• Treating earnest money casually. A deposit on the replacement property can come from the QI, and the QI should be the one to send it. If you pay it yourself, get reimbursed at closing only as your CPA advises, because a reimbursement from exchange funds can be treated as cash to you.
• Assuming the replacement will close. Sellers back out. Lenders change terms. Inspections turn up problems. An identification with a second and third option is the cheapest insurance in the process.

Does a 1031 exchange ever end the tax?

Not by itself. Deferral means the gain carries over into the basis of your replacement property. If you sell that property in a taxable sale, the deferred gain from every prior exchange comes due, along with the recapture of all the depreciation you've taken.

Under current law, there's one event that changes that: death. Under §1014, property inherited from a decedent generally takes a basis equal to its fair market value at the date of death. If you hold exchanged property until you die, your heirs generally take it at a stepped-up basis, and the deferred gain is not taxed to anyone. The 2025 tax law (the One Big Beautiful Bill Act) set the federal estate and gift tax exemption at $15 million per person for 2026, indexed for inflation afterward, so many families can pass property without federal estate tax as well. Congress has proposed limiting both §1031 and the step-up before and could do so again; the 2025 law left §1031 intact. I wouldn't build a plan that only works if nothing changes, but "exchange until you die" is a real strategy that many real estate families use.

When is a 1031 exchange not worth doing?

I think about four situations.

Small gains. If your gain is modest, the cost of a QI, the pressure of the deadlines, and the risk of overpaying for a replacement under a clock can outweigh the deferred tax.

You want out of real estate. An exchange keeps you in real property. If you're tired of managing property, a DST or another passive structure may fit, but you'd be buying a security with real risks, not getting cash. If what you want is liquidity, an exchange is the wrong tool.

You'd be forced into a bad deal. In a tight market, 45 days is short. Overpaying by 10% to save a 25% tax on part of your gain can be a poor trade. Run that math honestly.

You have losses. If the property is worth less than your basis, §1031 also defers the loss. Selling outright lets you recognize it.

Everything in this guide reflects federal law and IRS guidance as of October 2026. It's general information, not tax or legal advice for your situation, so confirm the plan with your CPA or tax attorney and your qualified intermediary before you list the property.

Risks and limitations

A 1031 exchange has risks of its own, separate from any particular property.

• Failure risk. If you miss a deadline, identify incorrectly, receive the proceeds, or break the same-taxpayer or related-party rules, the exchange can fail and the full gain becomes taxable. No extensions are available except IRS disaster relief.
• Overpaying under pressure. The deadlines can push you to buy property you wouldn't otherwise choose, at a price you wouldn't otherwise pay.
• QI risk. Exchange funds are held by a private company. If the QI fails or misuses the money, you may lose the funds and the exchange.
• Tax-law risk. Congress can change §1031, capital gains rates or the step-up in basis. Deferred gain is taxed under whatever rules apply when it's eventually recognized.
• Carryover basis. The replacement property inherits your low basis, so your future depreciation deductions are smaller than if you'd bought it with after-tax cash.
• Securities risks if you buy DST interests. DST interests used as replacement property are illiquid, can lose some or all of their value, and pay distributions that are not guaranteed and can be reduced or suspended. You rely entirely on the sponsor, have no control over decisions, and pay fees and loads that reduce returns. Many DSTs use leverage, which magnifies losses. They're available only to accredited investors through a private placement memorandum.

Frequently asked questions

Do the 45 days and 180 days run at the same time?

Yes. Both periods start the day after the relinquished property transfers. The 45-day identification period sits inside the 180-day exchange period; you don't get 225 days. And the 180 days can be cut short by your tax return due date, so if you sell in the fall, extend your return. Both counts are calendar days, including weekends and holidays, and neither rolls forward to the next business day.

Can I do a 1031 exchange on my primary residence?

No. A primary residence isn't held for investment or business use. It may qualify for the §121 home-sale exclusion instead ($250,000 of gain for a single filer, $500,000 for a married couple filing jointly, if ownership and use tests are met). Property that was partly a home and partly a rental, or a home you converted to a rental and held as one, can sometimes use both §121 and §1031 under Rev. Proc. 2005-14. That takes careful planning with a CPA.

How long do I have to own a property before exchanging it?

The law sets no minimum. What matters is that you held it for investment or business use. Many advisers suggest at least a year, partly because it spans two tax returns showing rental income, and the IRS's vacation-home safe harbor uses 24 months. A quick sale after purchase isn't automatically disqualifying, but it invites the question of whether you bought it to resell. I'd expect to explain any short hold.

Can I take some cash out and still do an exchange?

Yes. You'll pay tax on the cash you take, up to the amount of your gain, and defer the rest. This is a partial exchange. Many people take a little cash on purpose to cover a known need. Just remember that reducing debt without adding cash also creates taxable boot, and that new debt on the replacement doesn't offset cash you take out.

Can I exchange one property for several, or several for one?

Yes. You can sell one building and buy three, or sell three and buy one, as long as the identification rules are met and the total value and cash reinvested are sufficient. When you sell several properties in one exchange, the deadlines run from the first sale. Each additional property adds closing risk, which is why I'd usually suggest identifying backups.

Do I have to buy in the same state?

No. U.S. real property is like-kind to any other U.S. real property. You can sell in California and buy in Texas. If you leave a clawback state like California, expect to keep filing that state's tracking form (Form 3840 in California) every year you own the out-of-state replacement, and expect that state to tax its share of the deferred gain when you eventually sell in a taxable sale.

What happens if my replacement property purchase falls through on day 170?

If you identified backup properties, you can close on one of them before day 180. If you didn't, or the backups are gone, the exchange fails and the gain is taxable. The QI will release the funds under the exchange agreement. If the sale was in one year and the money comes back to you in the next, the installment rules may let you report the gain in the later year. This is why a backup identification is worth the extra effort.

Does a 1031 exchange get rid of depreciation recapture?

It defers it. The depreciation you've taken carries into the replacement property, and if you later sell in a taxable sale, the unrecaptured §1250 gain is taxed at up to 25%. Under current law, if you hold until death, your heirs generally receive a stepped-up basis and the deferred gain, including the recapture portion, isn't taxed. Congress could change that.

Can I use a 1031 exchange to buy a vacation home I'll use?

Only if you hold it as an investment. The IRS's Rev. Proc. 2008-16 safe harbor requires renting it at fair rent for 14 days or more in each of the two years after the exchange, with personal use limited to 14 days or 10% of the rental days, whichever is greater. Outside the safe harbor, a mostly personal-use property is hard to defend.

If you're planning a sale in the next year, the most useful next step is a call with me before you list, so we can look at your timeline, your debt and your likely replacement options together.

Sources

• 26 U.S. Code §1031, Exchange of real property held for productive use or investment (Cornell LII)
• 26 CFR §1.1031(k)-1, Treatment of deferred exchanges (Cornell LII)
• Instructions for Form 8824 (2025), IRS
• Disaster Relief Deadline Postponements under Rev. Proc. 2018-58, IPX1031
• 2026 Instructions for Form 593, Real Estate Withholding Statement, California FTB
• More Clarification on 1031 Exchanges (Rev. Rul. 2002-83), Journal of Accountancy
• IRS Updates Capital Gains Tax Thresholds for 2026, Kiplinger
• How Will the One Big Beautiful Bill Act Affect 1031 Exchanges?, JTC Group
• What Is a Clawback in a 1031 Exchange?, Realized