What is a 1031 exchange?

A structure that defers recognition of gain when proceeds from an investment property sale are reinvested into other qualifying investment property. It defers rather than eliminates, and the deferred gain generally carries into the replacement property's basis.

Can I use it on my own home?

No. It applies to property held for investment or productive use in a trade or business, and a primary residence does not qualify. That is the most common disqualification, and it is worth confirming your property's status with an accountant before planning around it.

When do I need to set it up?

Before the sale closes. A qualified intermediary must hold the proceeds, so the arrangement has to exist beforehand. A seller who closes and then decides to exchange has generally lost the option, and this is where more exchanges fail than anywhere else.

What are the deadlines?

There is a period after closing to identify replacement property in writing, and a longer outside period to complete the purchase. Both run from the sale closing and both are strict rather than indicative. Your intermediary and accountant confirm the exact periods.

What if I cannot find a replacement in time?

Missing the identification or completion deadline generally ends the deferral, and extensions are not routinely available. That is why the replacement search should start before the sale closes, and why backup identifications are commonly used.

Does my buyer need to agree?

Generally the buyer is unaffected and the contract just needs cooperation language. What matters more is telling the closing agent early so the proceeds are directed to the intermediary rather than to you, and keeping the closing date firm.

Is it always worth doing?

No. It depends on the size of the deferred gain against the intermediary fees and the deadline pressure. Being forced to buy within a deadline can produce a worse purchase, which is a genuine cost. Your accountant should model it before you list.

Can I touch the money in between?

No. Taking receipt of the proceeds, even briefly, can spoil the structure. That is the whole reason a qualified intermediary exists, and it is why the arrangement has to be in place before closing rather than arranged afterwards.

What if the replacement costs less than the sale?

Differences in value and in debt between the two properties can create taxable amounts even inside an exchange. The mechanics are technical and this is precisely the kind of detail to model with an accountant before committing to a replacement property.

Can you advise me on the structure?

No, and no agent should. We handle the sale and the purchase and keep the timeline workable. Eligibility, deadlines, identification rules and the tax outcome belong with a qualified intermediary and your accountant.

Can I exchange into more than one property?

The identification rules allow more than one replacement property to be identified, within limits on how many and on their combined value. Those limits are technical and worth walking through with your intermediary before you start looking, because they shape the search.

Can I exchange a Florida property for one in another state?

Real property in the United States is generally treated as like kind to other US real property, so an out-of-state replacement is commonly used. Whether your particular properties qualify is a question for your accountant rather than a general rule to rely on.

What does a qualified intermediary cost?

Fees vary by provider and by the complexity of the exchange, and they are modest against a meaningful deferred gain. The more important consideration is choosing one that is established and properly insured, since they will be holding your sale proceeds.

Can I live in the replacement property later?

Converting a replacement property to personal use has its own rules and consequences, and doing it too soon can undermine the exchange. If that is the eventual plan, say so at the outset, because it affects whether the structure suits you at all.

1031 exchange for investment property sellers

A 1031 exchange for investment property sellers is a way of deferring gain by reinvesting proceeds into other investment property, under rules that are specific and unforgiving about timing. It is not available on a primary residence, it cannot be arranged after closing, and it needs a qualified intermediary in place before the sale completes.

Free Home Valuation

Every situation on this page comes down to a number: what the property is worth and what you would net. We will work both out from recent sales near you, at no cost.

What an exchange is doing

It defers recognition of gain rather than eliminating it, which is the distinction people most often miss.

The deferred gain generally carries forward into the replacement property's basis.

It applies to property held for investment or productive use in a trade or business.

A primary residence does not qualify, and that is the most common disqualification.

The mechanics and the eligibility tests are technical, and they are an accountant's and attorney's territory.

What an agent contributes is the sale and purchase, not the structure.

The intermediary has to be there first

The proceeds cannot pass through your hands, which is the core structural requirement.

A qualified intermediary holds them between the sale and the purchase.

That arrangement must be in place before the sale closes, not after.

A seller who closes and then decides to exchange has generally lost the option.

This single point is where more exchanges fail than anywhere else.

Engage the intermediary while the property is under contract at the latest.

The deadlines

There is a period after closing within which replacement property must be identified in writing.

There is a longer outside period within which the purchase must complete.

Both run from the closing of the sale and they are strict rather than indicative.

Missing either generally ends the deferral, and extensions are not routinely available.

Because they are strict, the replacement search should start before the sale closes rather than after.

Your intermediary and accountant will confirm the exact periods that apply to your transaction.

Identifying replacement property

Identification is formal and in writing, with rules about how many properties may be identified.

It is not the same as being under contract, though being under contract is obviously safer.

Identifying property you have not secured is a real risk, because the deadline does not care.

A competitive market makes this harder, which is an argument for lining up options early.

Backup identifications are commonly used for exactly this reason.

The rules on how many and what value are technical and belong with your adviser.

What can go wrong

Closing the sale without an intermediary in place, which usually ends it immediately.

Missing the identification deadline because the replacement search started too late.

Failing to close on the replacement within the outside period.

Taking receipt of proceeds, even briefly, which can spoil the structure.

Buying property that does not qualify, or partly does, producing a partial result.

Debt and equity mismatches between the two properties, which can create taxable amounts.

How it affects the sale itself

The buyer generally does not care, and the contract usually just needs cooperation language.

Closing dates matter more than usual, because the deadlines run from the closing.

A delayed closing can compress the replacement search unhelpfully.

The closing agent needs to know in advance so the proceeds are directed correctly.

Telling everyone early is the practical protection, and it costs nothing.

We flag it to the closing agent at contract rather than assuming someone else has.

Whether it is worth doing

It depends on the size of the deferred gain against the cost and constraint of the structure.

A small gain may not justify the intermediary fees and the deadline pressure.

A large gain on a long-held investment property frequently does.

Being forced to buy within a deadline can lead to a worse purchase, which is a real cost.

Deferral is not forgiveness, so the eventual position matters to the decision.

That comparison is your accountant's, and it should happen before you list.

Alternatives worth asking about

Simply paying the tax and buying freely, which removes every deadline.

Installment structures, where the circumstances suit them.

Other exchange variants exist and are more complex than a straightforward deferred exchange.

Holding the property and refinancing instead of selling.

Each of these has consequences we are not qualified to compare.

Ask your accountant to lay them out before the selling decision is made.

Who needs to be involved

A qualified intermediary, engaged before closing.

Your accountant, to confirm eligibility and model the outcome.

A Florida attorney where the ownership structure is anything other than straightforward.

A closing agent who has handled exchanges, because the disbursement differs.

An agent on both sides of the move, which is where we come in.

Assembling that group before listing is what makes the timeline survivable.

What we do on an exchange sale

We ask at the listing appointment whether an exchange is contemplated, because it changes the timeline.

We tell the closing agent at contract so the proceeds are handled correctly.

We start the replacement search before the sale closes rather than after.

We build realistic closing dates, since the deadlines run from completion.

We do not advise on eligibility, deadlines or structure, and we will say so plainly.

Ask us to handle both sides and we will keep the property side on schedule.

This page explains how the money side of a Florida sale works so you can plan around it. It is not legal or tax advice. Tax on your sale belongs with an accountant, and the legal effect of your contract belongs with a Florida attorney. What we can give you is an accurate figure for what your home is worth and what you would net, which is the input both of those conversations need.

Frequently Asked Questions

What is a 1031 exchange?: A structure that defers recognition of gain when proceeds from an investment property sale are reinvested into other qualifying investment property. It defers rather than eliminates, and the deferred gain generally carries into the replacement property's basis.
Can I use it on my own home?: No. It applies to property held for investment or productive use in a trade or business, and a primary residence does not qualify. That is the most common disqualification, and it is worth confirming your property's status with an accountant before planning around it.
When do I need to set it up?: Before the sale closes. A qualified intermediary must hold the proceeds, so the arrangement has to exist beforehand. A seller who closes and then decides to exchange has generally lost the option, and this is where more exchanges fail than anywhere else.
What are the deadlines?: There is a period after closing to identify replacement property in writing, and a longer outside period to complete the purchase. Both run from the sale closing and both are strict rather than indicative. Your intermediary and accountant confirm the exact periods.
What if I cannot find a replacement in time?: Missing the identification or completion deadline generally ends the deferral, and extensions are not routinely available. That is why the replacement search should start before the sale closes, and why backup identifications are commonly used.
Does my buyer need to agree?: Generally the buyer is unaffected and the contract just needs cooperation language. What matters more is telling the closing agent early so the proceeds are directed to the intermediary rather than to you, and keeping the closing date firm.
Is it always worth doing?: No. It depends on the size of the deferred gain against the intermediary fees and the deadline pressure. Being forced to buy within a deadline can produce a worse purchase, which is a genuine cost. Your accountant should model it before you list.
Can I touch the money in between?: No. Taking receipt of the proceeds, even briefly, can spoil the structure. That is the whole reason a qualified intermediary exists, and it is why the arrangement has to be in place before closing rather than arranged afterwards.
What if the replacement costs less than the sale?: Differences in value and in debt between the two properties can create taxable amounts even inside an exchange. The mechanics are technical and this is precisely the kind of detail to model with an accountant before committing to a replacement property.
Can you advise me on the structure?: No, and no agent should. We handle the sale and the purchase and keep the timeline workable. Eligibility, deadlines, identification rules and the tax outcome belong with a qualified intermediary and your accountant.
Can I exchange into more than one property?: The identification rules allow more than one replacement property to be identified, within limits on how many and on their combined value. Those limits are technical and worth walking through with your intermediary before you start looking, because they shape the search.
Can I exchange a Florida property for one in another state?: Real property in the United States is generally treated as like kind to other US real property, so an out-of-state replacement is commonly used. Whether your particular properties qualify is a question for your accountant rather than a general rule to rely on.
What does a qualified intermediary cost?: Fees vary by provider and by the complexity of the exchange, and they are modest against a meaningful deferred gain. The more important consideration is choosing one that is established and properly insured, since they will be holding your sale proceeds.
Can I live in the replacement property later?: Converting a replacement property to personal use has its own rules and consequences, and doing it too soon can undermine the exchange. If that is the eventual plan, say so at the outset, because it affects whether the structure suits you at all.

Depreciation recapture on an investment property sale

Depreciation recapture explained for sellers: why depreciation you claimed on a rental comes back at sale, and why it applies even if you never claimed it.

Capital gains tax on a home sale: the exclusion

Capital gains tax on a home sale: how the $250,000 and $500,000 exclusion works, the ownership and use tests, and what raises your basis.

Your escrow account and insurance refunds after closing

Your escrow account refund after selling a house arrives from the lender, not at closing. What comes back, roughly when, and what you have to cancel yourself.

From the Journal

Home Selling Tips

Selling a Rental Property in Florida: Tenants' Rights, Taxes and 1031 Exchanges

Work out your numbers

What is my home worth?

A valuation built from closed sales in your own community, with the comparables named.

Estimate your net proceeds

Work the commission, documentary stamps and closing costs against your own number.

Current market reports

Prices, days on market and inventory for the counties we cover, updated monthly.

How we list a home

What we do between the listing agreement and the closing table, phase by phase.

Talk It Through

Tell us the situation and we will tell you what it is worth

Most of what makes a sale complicated is solvable once somebody has looked at the actual numbers. Onias Derilus is a licensed Florida broker and there is no cost to a conversation, whether you list this month or next year.

Get My Home Value Buying Too? Start Here

Keep Reading