1031 Exchange & DST Investing in Florida
Florida imposes no state individual income tax, so capital gains on real estate face only federal tax, and a 1031 exchange defers that federal gain. Strong in-migration across Miami, Tampa, and Orlando makes Florida a top destination for 1031 replacement capital.
State tax treatment of a 1031 exchange
Florida does not levy a state individual income tax, so there is no separate state-level capital gains tax on the sale of investment real estate. A federal 1031 exchange defers the federal capital gains and depreciation recapture tax, and because there is no Florida income tax, no additional state deferral analysis is required.
This absence of state income tax makes Florida attractive both as a location for relinquished property and as a residence for investors, since gains recognized in a future taxable sale would still face no Florida income tax, only federal tax.
Market snapshot
Florida's investment markets span South Florida (Miami, Fort Lauderdale, West Palm Beach), Tampa Bay, Orlando, Jacksonville, and the growing Southwest Gulf Coast. Sustained domestic and international in-migration, tourism, and job growth have driven strong demand across multifamily, industrial, retail, hospitality, and single-family rentals.
Florida consistently ranks among the leading states for population gains, and its no-income-tax status draws both residents and investors. That combination makes it one of the most sought-after markets for 1031 replacement capital, though pricing and insurance costs warrant careful underwriting.
Why 1031 & DST investors look here
- No Florida state income tax means capital gains face federal tax only.
- Leading-in-the-nation population and job growth support broad-based real estate demand.
- Deep, liquid markets across multiple metros give investors ample replacement options.
Replacement-property options
Florida investors can exchange into Delaware Statutory Trust (DST) interests for passive ownership, use a 721 exchange to move into an UPREIT structure, or invest gains through Qualified Opportunity Zone funds. Replacement property need not be located in Florida; a DST can hold real estate in multiple states, allowing investors to diversify while satisfying the like-kind requirement.
Frequently asked questions
Does Florida tax a 1031 exchange?
No. Florida has no state individual income tax, so real estate capital gains face only federal tax, which a 1031 exchange defers.
Can I exchange Florida property for out-of-state DSTs?
Yes. Replacement property does not have to be in Florida, and DST interests holding out-of-state real estate can qualify as like-kind.
Do I still need a qualified intermediary in Florida?
Yes. A 1031 exchange is a federal requirement, so you must use a qualified intermediary and meet the federal deadlines regardless of Florida's lack of income tax.
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.