1031 exchange rules: how to defer capital gains on real estate

A Section 1031 like-kind exchange lets you defer capital gain (and often depreciation recapture) when you swap qualifying investment or business real property for other qualifying US real property. Personal residences generally do not qualify. After 2017 tax law changes, 1031 no longer applies to stocks, crypto, or most personal property — it is a real-estate tool.

Deferral is not elimination. Basis typically carries over to the replacement property, so tax may be due when you eventually sell without another exchange. Boot (cash or other non-like-kind value) can trigger partial gain recognition in the year of the exchange.

Typical delayed exchanges use a qualified intermediary. You generally must identify replacement property within 45 days of closing on the relinquished property and close on the replacement within 180 days (or your tax-return due date, if earlier). Missed deadlines usually mean a taxable sale.

Section 121 (primary residence exclusion) and 1031 (investment property deferral) are different codes. Some mixed-use facts can involve both, but that is specialist work. Our real estate calculator estimates a taxable sale, including Section 121 when you mark a primary residence — it does not model a completed 1031. Use it to see the tax you might defer, then work with a 1031 intermediary and CPA.