1031 exchange
A federal tax rule letting investors defer capital gains tax by rolling proceeds from one investment property into another. Strict timelines apply: 45 days to identify the new property, 180 days to close.
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Free to set up. No credit card.Part 1 of 4
Why a seller cares
Selling an investment property and buying another through a 1031 exchange defers the capital gains tax. The clocks are strict, the intermediary has to be in place first, and it never applies to the home you live in.
Part 2 of 4
A simple example
You sell a rental for $400,000 with a $200,000 gain and buy a $450,000 replacement through an intermediary within the deadlines. The tax is deferred.
| The deadline | What has to happen |
|---|---|
| Before the sale closes | A qualified intermediary is engaged |
| Day 45 | Replacements identified in writing |
| Day 180 | The replacement closes |
A 1031 is a deferral with three deadlines. Miss one and the gain is taxed this year.
Part 3 of 4
What people get wrong
That it is tax-free. It is tax-deferred; the gain follows you into the next property and is taxed when you sell without exchanging.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
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