What is a 1031 Exchange?

In real estate, a 1031 exchange is a swap of one investment property for another that allows capital gains to be deferred.

  • The properties being exchanged must be considered like-kind in the eyes of the Internal Revenue Service (IRS) for capital gains taxes to be deferred.

  • If used correctly, there is no limit on how frequently you can do 1031 exchanges.

Most swaps are taxable as sales, although if yours meets the requirements of 1031, then you’ll either have no tax or limited tax due at the time of the exchange.


The 1031 provision is for investment and business property, although the rules can apply to a former primary residence under certain conditions. There are also ways that you can use 1031 for swapping vacation homes


A 1031 Exchange doesn’t need to be an all-or-nothing proposition. You can opt to cash out some proceeds from your relinquished property’s sale. At the same time – when you reinvest the remaining proceeds – capital gain recognition and other tax exposures are deferred.




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