The short answer
A 1031 exchange lets you sell investment or business real estate and buy other investment real estate without paying tax on the gain right away. The tax is deferred, not forgiven: your old basis carries into the new property, and the gain can come due when you sell without another exchange.
Last reviewed: October 2026
This page explains how taxes and reporting work. It isn't a recommendation to buy, sell or hold any investment.
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The basic rules
- Real estate only. Since 2018, only real property qualifies, held for business or investment.
- Not your home. A main home or a personal vacation home generally doesn't qualify.
- 45 days after you sell to identify the replacement property in writing.
- 180 days after you sell to close on it (or your return's due date, with extensions, if that's sooner).
- Don't touch the money. A qualified intermediary holds the sale proceeds. If you receive them, the exchange can fail.
What's still taxable
Cash you take out, or debt that isn't replaced, is called "boot" and is generally taxable in the year of the exchange.
How it's reported
Every exchange is reported on Form 8824 with your return for the year you gave up the old property. The form tracks the deferred gain and figures your basis in the new property, which also affects your future depreciation.
Exchanged into a DST? See how a 1031 into a DST affects your basis and depreciation.
Official source: IRS: Like-kind exchanges, real estate tax tips.
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Disclaimer: This page is general information, not tax advice. Every situation is different, and tax rules change. Reading this page doesn't make you a client.