Grow Your Wealth in U.S. Real Estate, Tax-Deferred
Discover how to use Section 1031 of the U.S. Tax Code, the 'Like-Kind Exchange,' to legally defer capital gains taxes and maximize your reinvestment returns.
Calculate My Tax SavingsTax Deferral
Postpone paying significant taxes, like capital gains and depreciation recapture, on the sale of a property, preserving your investment capital for today.
Wealth Growth
Reinvest the money you would have paid in taxes to acquire larger assets, growing your wealth exponentially through the power of compounding.
Portfolio Diversification
Flexibly improve your investment portfolio without a tax hit, such as swapping high-maintenance properties for low-maintenance ones or moving to a different market.
Estate Planning
Taxes deferred over a lifetime of exchanges can be permanently eliminated upon death through the 'Step-up in Basis' provision for your heirs.
Core Rules of a 1031 Exchange
These are the essential conditions you must follow for a successful exchange.
The Golden Rules: 45 & 180-Day Timelines
Sell Relinquished Property
Day 0: The clock starts
Identify Replacement Property
In writing to your QI
Acquire Replacement Property
Exchange is complete
Like-Kind Property
For real estate, this is interpreted very broadly. You can exchange an apartment for a retail center, or raw land for a rental house. Most investment or business properties qualify.
Held for Investment/Business
Both the property you sell and the one you acquire must be held for 'investment' or 'productive use in a trade or business,' not for personal use. 'Flipping' for short-term profit does not qualify.
Qualified Intermediary (QI)
An essential third party that prevents you from actually receiving the sale proceeds. The QI holds the funds and uses them to acquire the new property on your behalf. Your lawyer, accountant, etc., cannot be your QI.
1031 Exchange Tax Savings Simulator
Enter your own investment details to see how much of a difference a 1031 exchange makes to your available reinvestment funds.
Enter Simulation Data
Taxable Sale
Total Gain: $3,000,000
Federal Tax (Gains+Recapture): $620,000
Net Investment Income Tax (NIIT): $114,000
State Tax: $399,000
Total Tax Due: -$1,133,000
Net Reinvestment Funds: $2,667,000
1031 Exchange
Total Gain: $3,000,000
Federal Tax: $0 (Deferred)
Net Investment Income Tax (NIIT): $0 (Deferred)
State Tax: $0 (Deferred)
Total Tax Due: $0
Net Reinvestment Funds: $3,800,000
Reinvestment Power Comparison
Advanced 1031 Exchange Strategies
Complex but powerful methods for solving specific investment challenges.
Used when you need to buy the new property before selling the old one. A special entity, an Exchange Accommodation Titleholder (EAT), "parks" one of the properties to solve ownership issues. Helps you secure a desired property in a competitive market.
Allows you to use exchange funds not just to buy, but also to repair, improve, or build a new property. The EAT holds title during construction, and the value of completed improvements within 180 days is counted towards the exchange value.
Foreign investors can also use a 1031 exchange, but 15% of the sales price may be withheld under FIRPTA rules. To avoid this, you must apply to the IRS for a withholding certificate (Form 8288-B) before closing to notify them of the planned tax deferral.
A powerful strategy where, after converting a primary home to a rental, you can apply both the Section 121 capital gains exclusion (up to $500k for a couple) and the Section 1031 tax deferral. Requires meeting strict holding and residency period rules.
The Ultimate Benefit: Permanent Tax Elimination
Learn how "Swap 'Til You Drop" can turn a lifetime of tax deferral into a complete tax exemption at inheritance.
Swap 'Til You Drop
An investor can perform an unlimited number of 1031 exchanges over their lifetime. This allows them to continuously roll their gains from one property to the next, growing their portfolio without the drag of a massive tax bill.
Step-up in Basis at Death
When an investor passes away, their heirs inherit the property at its fair market value on the date of death. This process magically erases all the deferred capital gains and depreciation recapture, allowing heirs to sell the asset with little to no tax liability.
Investor's Lifetime
Deferred Taxes Accumulate
At Inheritance
Final Property
Basis = Market Value at Death
Accumulated Deferred Tax = $0 (Wiped Out)
