1031 Exchange & DST Investing in Ohio
Ohio conforms to the federal 1031 exchange and taxes income at a top rate of 3.125% for 2025, moving to a flat 2.75% in 2026, so a like-kind swap defers both state and federal gain. Columbus, Cleveland, and Cincinnati drive exchange activity, and DST replacement interests are available nationwide.
State tax treatment of a 1031 exchange
Ohio conforms to IRC Section 1031, so a federal like-kind exchange of real property also defers Ohio income tax on the gain. For tax year 2025 Ohio's top marginal individual rate is 3.125% on income over $100,000, and under enacted law the state moves to a flat 2.75% rate beginning in 2026. Certain Ohio municipalities also levy local income taxes.
Ohio does not impose nonresident real estate withholding at closing and has no clawback or continued-reporting rule that recaptures gain deferred on an out-of-state exchange. Deferred gain carries into the replacement property's basis until a future taxable sale.
Market snapshot
Columbus is one of the Midwest's fastest-growing metros, with major industrial, data-center, and semiconductor investment, deep multifamily demand, and expanding logistics. Cleveland offers a large healthcare cluster anchored by the Cleveland Clinic plus industrial and multifamily product, and Cincinnati adds diversified corporate, logistics, and net-lease activity.
Population and job growth around Columbus, ongoing industrial and data-center development, and steady apartment absorption across all three metros draw significant 1031 replacement capital.
Why 1031 & DST investors look here
- Full 1031 conformity defers Ohio's income tax, dropping to 2.75% flat in 2026.
- Columbus growth and semiconductor and data-center investment fuel industrial demand.
- Passive DST ownership lets Ohio investors exit active management while staying invested.
Replacement-property options
Ohio exchangers can place proceeds into like-kind real estate anywhere in the United States, so a Columbus, Cleveland, or Cincinnati property can be exchanged into professionally managed Delaware Statutory Trust interests nationwide. DSTs provide fractional, passive ownership across industrial, multifamily, data-center-adjacent, and net-lease sectors; a later 721 UPREIT exchange can convert those interests into REIT operating-partnership units, and Opportunity Zone funds offer an alternative deferral route.
Frequently asked questions
Does Ohio tax a 1031 exchange?
No. Ohio conforms to IRC Section 1031, so a valid like-kind exchange defers Ohio income tax on the gain until a future taxable sale of the replacement property.
Can I exchange Ohio property for out-of-state DSTs?
Yes. Like-kind real property may be located in any state, so an Ohio property can be exchanged into DSTs holding assets elsewhere while keeping 1031 deferral.
What is Ohio's capital gains tax rate?
Ohio taxes capital gains as ordinary income at a top rate of 3.125% for tax year 2025, moving to a flat 2.75% in 2026; some municipalities also impose local 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.