What are the 1031 exchange rules?

The IRS requires four things: (1) both the relinquished and replacement properties must be held for investment or business use, (2) you must identify replacement candidates in writing within 45 calendar days of your relinquished property closing, (3) you must close on a replacement within 180 days, and (4) a Qualified Intermediary must hold the exchange funds between closings. Miss any of these and the exchange fails.

Can the 45-day or 180-day deadlines be extended?

Almost never. The deadlines are statutory and the IRS does not grant extensions for weekends, holidays, market conditions, or personal circumstances. The only exceptions are presidentially-declared disaster zones, where the IRS occasionally issues blanket extensions. Plan around the deadlines, not against them.

What is the 3-property rule in a 1031 exchange?

The 3-property rule lets you identify up to 3 potential replacement properties of any combined value. It is the most common identification approach because it is simple and flexible. You must close on at least one of the identified properties (you do not have to close on all three).

What is the 200% rule?

The 200% rule lets you identify any number of replacement properties as long as their combined fair market value does not exceed 200% of the relinquished property's sale price. It is useful when you want to identify more than 3 candidates. Exceeding the 200% threshold can disqualify the entire identification unless you fall back to the 95% rule.

What counts as like-kind for real estate?

For US real estate, "like-kind" is broad: a single-family rental can exchange into a multifamily, commercial building, raw land, NNN retail, or another SFR. Both properties must be held for investment or business use - not for personal use, and not as inventory for resale. International real estate does not qualify. See Treasury Reg §1.1031 for the full definition.

Do I need a Qualified Intermediary for every 1031 exchange?

Yes for delayed exchanges (the standard structure where you sell first and buy later). The QI must be engaged before the relinquished property closes, holds the exchange proceeds, and disburses them directly to the replacement property closing. You cannot receive the proceeds even briefly. Direct simultaneous swaps between two parties can theoretically avoid a QI, but those are vanishingly rare in practice.

1031 Exchange Rules and Deadlines | 45 and 180 Day Timeline

The Two Hard Deadlines

The 45-day and 180-day rules have no exceptions.

The IRS imposes two non-negotiable deadlines on every 1031 exchange. Miss either and the exchange fails - you owe full capital gains tax on the relinquished property in the year of sale. There are no extensions for weekends, holidays, natural disasters (with very narrow exceptions), or market conditions. Both clocks start the moment your relinquished property closes.

For full strategic context, see the Austin 1031 exchange guide. This page is the strict-rules reference.

Day 0

Relinquished Property Closes

Title transfers on your sold property. Your Qualified Intermediary takes the proceeds. Both clocks start counting calendar days from this date, including weekends and holidays.

Day 45

Identify Replacements in Writing

You must submit a written, unambiguous identification of replacement property candidates to your QI by midnight on Day 45. Most investors identify 2-3 candidates by street address, legal description, or APN.

Day 180

Close on Replacement

You must close on one (or more) of the identified replacement properties by Day 180 (or your tax return due date, whichever comes first). Partial replacements result in taxable boot on the unreplaced value.

Identification Rules

How to identify replacement properties.

The IRS allows three identification approaches. Most exchanges use the 3-property rule because it is the simplest. The 200% rule and the 95% rule exist for investors who want more replacement options on the table.

3-Property Rule

Up to 3, any value

Identify any 3 properties of any combined value. Most common approach. Works regardless of the relinquished property's price. Each property must be identified unambiguously by street address, legal description, or APN. Vague descriptions like "a duplex in East Austin" do not satisfy the IRS.

200% Rule

Any number, capped at 200%

Identify any number of properties as long as their combined fair market value does not exceed 200% of the relinquished property's value. Useful when you want to identify more than 3 candidates and the math fits. Exceeding 200% can disqualify the entire identification.

95% Rule

Exceeded 200%? Buy 95%

If you exceeded the 200% rule (identified too many properties), the exchange can still be saved if you actually acquire 95% of the total identified value within 180 days. Rarely used because it requires near-certainty on the close. Most QIs steer investors back to the 3-property rule.

Like-Kind Requirements

What counts as like-kind real property.

For US real estate, "like-kind" is intentionally broad. Almost any real property held for investment or business use exchanges into almost any other real property held for investment or business use, regardless of property type, quality, or location within the United States. The constraint is the use, not the type.

What qualifies: single-family rentals, multifamily apartments, commercial buildings, industrial property, retail centers, raw land held for investment, mineral rights, easements, and leasehold interests of 30+ years. International real estate does not qualify - foreign property is not like-kind to US property after the 2017 Tax Cuts and Jobs Act.

What does not qualify: your primary residence, vacation homes used personally, fix-and-flip properties held for resale (treated as inventory, not investment), and most personal property since the TCJA. Stocks, bonds, partnership interests, and notes also do not qualify. The full Treasury Reg §1.1031 defines the boundaries.

Other Rules That Kill Exchanges

The requirements that are easy to miss.

Equal or up in value

The replacement property must equal or exceed the relinquished property's net sales price. Trading down by even $50K means $50K of taxable boot. To defer all capital gains, you must equal or exceed both the value and the debt level.

Debt replacement

If the relinquished property had $500K of mortgage debt, the replacement must carry at least $500K of debt OR you must offset with additional cash equity. Trading from a $500K-mortgage rental to a $200K-mortgage replacement creates $300K of boot unless you put $300K cash into the new property.

Same taxpayer

The taxpayer on the relinquished property deed must match the taxpayer on the replacement property deed. LLCs, trusts, and partnerships have specific entity rules. Transferring from your individual name to a new LLC mid-exchange typically breaks the exchange.

Qualified Intermediary required

The IRS requires a third-party QI to hold exchange funds between closings. You cannot touch the proceeds at any point. The QI must be engaged before the relinquished property closes - assigning a QI after closing does not work.

Investment intent

Both properties must be held for investment or productive business use, with documented intent. Buying a "rental" you actually plan to flip in 6 months disqualifies the exchange. The IRS examines facts and circumstances; most CPAs recommend at least 12-24 months of demonstrated rental use to support investment intent.

Identification specificity

Each identified property must be unambiguous: street address, legal description, or APN. "A multifamily in Round Rock" is not enough. The identification must be in writing to the QI by midnight Day 45 - a verbal mention to your agent does not count.

For the actual mechanics in plain English plus a real-numbers tax-savings example, see the Austin 1031 calculator. For the variations not covered above (reverse exchanges, build-to-suit, related-party rules), see reverse 1031 exchanges in Austin.

1031 Exchange Rules and Deadlines

The 45-day and 180-day rules have no exceptions.

Relinquished Property Closes

Identify Replacements in Writing

Close on Replacement

How to identify replacement properties.

Up to 3, any value

Any number, capped at 200%

Exceeded 200%? Buy 95%

What counts as like-kind real property.

The requirements that are easy to miss.

Equal or up in value

Debt replacement

Same taxpayer

Qualified Intermediary required

Investment intent

Identification specificity

Rules & Deadlines FAQ.

Ready to start your 1031 exchange?

Talk to Luke

1031 Exchange Rules and Deadlines

The 45-day and 180-day rules have no exceptions.

Relinquished Property Closes

Identify Replacements in Writing

Close on Replacement

How to identify replacement properties.

Up to 3, any value

Any number, capped at 200%

Exceeded 200%? Buy 95%

What counts as like-kind real property.

The requirements that are easy to miss.

Equal or up in value

Debt replacement

Same taxpayer

Qualified Intermediary required

Investment intent

Identification specificity

Rules & Deadlines FAQ.

Ready to start your 1031 exchange?

Talk to Luke

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