1031 Exchange & DST Investing in Nashville, TN
Nashville is a fast-growing healthcare, music, and corporate-relocation hub with a strong multifamily and hospitality base. Because Tennessee has no state income tax, a 1031 exchange faces no state-level capital-gains tax, and DSTs are available to accredited investors nationwide.
State tax treatment of a 1031 exchange
Capital-gains treatment is set at the state level, and Tennessee imposes no personal income tax on wages or investment income. As a result there is no state capital-gains tax on a real estate sale and no state nonresident withholding, so a 1031 exchange in Nashville defers only federal tax on the gain. See our Tennessee state page for details.
Market snapshot
Nashville has emerged as one of the Sun Belt's standout growth markets, anchored by a large healthcare-management industry led by HCA Healthcare, a globally recognized music and entertainment sector, and a wave of corporate relocations and expansions including Oracle's planned campus on the East Bank and Amazon operations. Job and population growth have consistently outpaced national averages, and tourism supports a deep hospitality sector. Multifamily is the leading investment asset class, with activity concentrated in downtown, the Gulch, and suburban submarkets such as Franklin, Brentwood, and Murfreesboro.
Rapid in-migration drove one of the most active apartment construction pipelines in the country; as deliveries peaked, rent growth moderated and cap rates widened from cycle lows, though absorption has remained comparatively healthy as supply eases. Industrial and mixed-use development have expanded alongside residential growth. For 1031 investors, Nashville's diversified white-collar employment, healthcare anchor, corporate in-migration, and no state income tax are why replacement capital continues to target the metro.
Why 1031 & DST investors look here
- Healthcare-management capital anchored by HCA plus major corporate relocations
- Population and job growth well above national averages driving multifamily demand
- No state income tax and a deep tourism and hospitality base
Replacement-property options
An investor selling in Nashville can defer gain by exchanging into DST interests, and the replacement property need not be in Tennessee; like-kind treatment applies to real estate anywhere in the United States. Delaware Statutory Trusts allow accredited investors to reinvest proceeds into professionally managed, institutionally sized assets, and a 721 UPREIT contribution or Qualified Opportunity Zone investment may suit some objectives. Suitability depends on individual circumstances and should be reviewed with qualified tax and financial professionals.
Frequently asked questions
Is Nashville a good market for a 1031 replacement?
Nashville offers strong healthcare and corporate anchors and above-average growth, though a large apartment pipeline has moderated recent rent growth. Whether it suits a given exchange depends on your objectives and risk tolerance.
Does Tennessee tax a 1031 exchange?
Tennessee has no state income tax, so there is no state-level capital-gains tax on a property sale and no state withholding. A 1031 exchange in Nashville defers only federal tax on the gain.
Can I exchange Nashville property for out-of-state DSTs?
Yes. Like-kind real estate can be located anywhere in the United States, so Nashville 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.