1031 Exchange & DST Investing in Denver, CO
Denver is a diversified Front Range hub spanning aerospace, energy, technology, and logistics, with deep multifamily and industrial sectors. Colorado conforms to the federal 1031 exchange, taxes capital gains at a flat 4.4%, and applies a 2% nonresident withholding, and DSTs are available to accredited investors nationwide.
State tax treatment of a 1031 exchange
Capital-gains treatment is set at the state level. Colorado conforms to Internal Revenue Code Section 1031, so a properly structured exchange defers federal and state tax on the gain; the state applies a flat 4.4% income tax rate and generally withholds 2% from nonresident real estate sellers, which a qualifying exchange can address. See our Colorado state page for details.
Market snapshot
Denver's economy is unusually diversified for its size, spanning aerospace and defense, energy, technology, healthcare, and outdoor-industry brands, with a highly educated workforce and quality-of-life draw that sustains in-migration. Industrial demand centers on the I-70 and I-25 corridors and the area around Denver International Airport, while life-science activity clusters around Boulder and the Fitzsimons/Anschutz medical campus in Aurora. Multifamily and industrial are the leading investment asset classes, alongside a downtown office market still repositioning post-pandemic.
Sustained population growth has driven heavy apartment construction across downtown, the RiNo and Cherry Creek submarkets, and the suburban north and southeast rings; as supply peaked, rent growth cooled and cap rates widened from cycle lows. Denver's central-time-zone logistics position and role as the commercial capital of the Rocky Mountain region continue to support distribution demand. For 1031 investors, the metro's economic diversity, educated labor force, and long-run in-migration are why replacement capital targets it despite near-term supply pressure.
Why 1031 & DST investors look here
- Diversified economy across aerospace, energy, technology, and life science
- Rocky Mountain logistics hub with strong I-25/I-70 and airport-area industrial demand
- Educated workforce and quality-of-life-driven in-migration supporting housing demand
Replacement-property options
An investor selling a Denver property can defer gain by exchanging into DST interests, and the replacement property does not have to be in Colorado; like-kind treatment applies to real estate anywhere in the United States. Delaware Statutory Trusts let accredited investors reinvest exchange proceeds into professionally managed, institutionally sized properties, and a 721 UPREIT contribution or Qualified Opportunity Zone investment may fit certain goals. Suitability depends on individual circumstances and should be reviewed with qualified tax and financial professionals.
Frequently asked questions
Is Denver a good market for a 1031 replacement?
Denver offers a diversified economy, an educated workforce, and durable in-migration, though recent apartment supply has moderated rent growth. Whether it suits a given exchange depends on your objectives and risk tolerance.
Does Colorado tax a 1031 exchange?
Colorado conforms to federal Section 1031, so a valid exchange defers state as well as federal tax on the gain. The state applies a flat 4.4% rate and a 2% nonresident withholding that a qualifying exchange can address.
Can I exchange Denver property for out-of-state DSTs?
Yes. Like-kind real estate can be located anywhere in the United States, so Denver sale proceeds can be exchanged into DSTs holding property in other states.
Gerald F. “Jerry” Baker, III — Founder & Managing Principal, Baker 1031 Investments · FINRA Series 22 / 63 · SIE. Read full bio →
State tax treatment is general and changes frequently; this page is educational and is not tax, legal, or investment advice. Confirm current state and local rules with your own CPA and attorney. Securities offered through Aurora Securities, member FINRA/SIPC. Real estate investments involve risk, including possible loss of principal.