1031 exchanges: defer taxes, grow your portfolio
Sell an investment property and roll 100% of your proceeds into a stronger asset — deferring capital gains and depreciation recapture. We'll help you hit the deadlines and rules.
How a 1031 works
A 1031 exchange lets you defer capital gains and depreciation-recapture taxes when you sell an investment property and reinvest in another 'like-kind' property. Done right, every dollar keeps working for you instead of going to taxes.
- ✓Identify your replacement property within 45 days of the sale.
- ✓Close on it within 180 days.
- ✓To fully defer, the replacement's value and debt should equal or exceed what you sold (or add cash).
- ✓You must use a Qualified Intermediary — you can't touch the proceeds in between.
- ✓Applies to investment/business property — not your primary residence or a flip.
The identification rules
Within that 45-day window, you identify replacement candidates under one of three rules:
- ✓Three-property rule — up to three properties of any value.
- ✓200% rule — any number, as long as their total value is ≤200% of your sale price.
- ✓95% rule — any number, if you acquire at least 95% of the total value identified.
Common questions
Is a 1031 only for large investors?
No. Any investment-property owner can use a 1031 exchange — the same rules apply whether it's one rental or many.
Can I exchange my primary home?
No. 1031 exchanges are for investment or business property, not a primary residence.
Can I take some cash out?
You can, but any cash you pull out (called 'boot') is taxable. The rest can still be deferred.
Do I ever pay the tax?
The tax is deferred, not erased — it's due if you eventually sell without exchanging again. Many investors keep exchanging to keep deferring.
What if my replacement appraises lower?
You can still exchange, but the shortfall in value/debt is generally taxable. We'll structure it to minimize that.
Ready when you are
Questions? Call or text Andrew at (760) 801-6550 — no pressure, no obligation.