1031 Exchanges

Your Guide to Deferring 100% of Taxes on Investment Property

A 1031 Tax-Deferred Exchange is a powerful strategy for real estate investors looking to defer all taxes. By reinvesting the proceeds from the sale of an investment property into another like-kind property, you can postpone paying taxes and keep more of your money working for you.

This strategy is commonly used by investors who want to grow their portfolios, transition out of active management, or move into diversified, passive ownership through vehicles like Delaware Statutory Trusts (DSTs).

What Qualifies as Like-Kind Property?

The IRS defines “like-kind” broadly. Most real estate held for business or investment purposes qualifies, even if the property type is different. This includes:

  • Apartment buildings 

  • Single-family rental homes 

  • Raw land or vacant lots 

  • Office, industrial, or retail properties 

  • Self-storage or healthcare real estate

Want to know how DSTs can meet like-kind exchange requirements?

Key 1031 Exchange Rules and Deadlines

To meet IRS requirements and successfully defer all taxes, the 1031 Exchange process must follow a strict timeline:

  1. Engage a Qualified Intermediary (QI) before the sale.
    A QI is required to handle the exchange of funds and documents. Without one in place before closing, your exchange will not qualify.

  2. You have 45 days to identify replacement property.
    From the date you sell your current property, you must identify potential replacement properties in writing with your QI within 45 calendar days.

  3. You have 180 days to complete the exchange.
    The replacement property must be closed within 180 calendar days of the sale of your relinquished property.

Requirements for Full Tax Deferral

To defer 100% of your capital gains tax liability, you must also meet the following financial conditions:

  • The replacement property must be of equal or greater value than the property you sold

  • You must reinvest all net proceeds from the sale

  • You must take on equal or greater debt on the new property, or offset any reduction with additional cash

See How We’ve Helped Others

Looking to explore how other investors have successfully navigated the 1031 Exchange process?

Simplify the Complex with Expert Help

At Cole 1031 Solutions, we specialize in navigating the complexities of a successful 1031 Exchange using DSTs. From working with top-tier DST sponsors to managing tight timelines and layered transactions, we help you move confidently through the process and toward your financial goals.