Home›1031 Exchange Rules
IRS Requirements · 2026

1031 Exchange Rules (2026)

Every rule governing a 1031 exchange, organized by category with the specific IRS code citation. Based on current regulations through 2026 and written by a Certified Exchange Specialist who has navigated these rules on 5,000+ exchanges.

Updated April 2026·Reading time: 12 min·By Leah Badach, CES

The like-kind rule

Code: IRC §1031(a). Rule: The relinquished and replacement property must both be “real property held for productive use in a trade or business or for investment” — and the term “like-kind” is interpreted broadly for real estate.

Virtually any US real estate qualifies as like-kind to any other US real estate. A single-family rental can exchange into commercial office space. Raw land can exchange into an apartment building. Mineral rights can exchange into a duplex.

Since the 2017 Tax Cuts and Jobs Act, personal property no longer qualifies. Equipment, art, vehicles, intellectual property — all removed from 1031 treatment.

Qualifying property

Qualifying property must be held for:

Not qualifying

Holding period rules

The IRS doesn't publish a bright-line holding period. “Intent to hold for investment” is the standard, determined by facts and circumstances.

Industry practice:

Not written in the code

You won't find “2 years” in IRC §1031. It's a safety margin derived from private letter rulings, tax court cases, and practitioner consensus. Shorter holds have survived audits; longer holds are safer.

45- and 180-day timelines

Code: IRC §1031(a)(3). Two calendar-day clocks start when your relinquished property closes:

Both dates are absolute. Calendar days, not business days. No extensions for weekends, holidays, financing delays, or inspections. The only exception is a federally-declared disaster area (Rev. Proc. 2018-58).

There's also a secondary rule: if your federal tax return for the year of the exchange is due before Day 180 and you haven't filed an extension, the exchange must complete by the earlier due date.

See the 1031 exchange timeline pillar for a visual breakdown.

Identification rules

Code: Treasury Reg. §1.1031(k)-1(c). You must use one of three identification methods:

3-property rule

Identify up to 3 properties regardless of value. Most common choice.

200% rule

Identify any number of properties as long as their combined fair market value is ≤ 200% of the relinquished property's sale price.

95% rule

Identify any number of properties of any value, but you must close on properties representing ≥ 95% of the total identified value. Very rarely used — the closing requirement creates too much risk.

Identification must be unambiguous

Properties must be identified by street address, legal description, or distinguishable name — not by vague reference like “a property in Dallas.” Identification must be in writing, signed, delivered to the QI (not your agent), and received by the QI on or before Day 45.

Equal or greater rule

To defer 100% of the gain, the replacement property must have:

Falling short in any of these three creates taxable boot. Partial exchanges are legal — you accept tax on the boot portion and defer the rest.

Qualified intermediary rule

Code: Treasury Reg. §1.1031(k)-1(g)(4). A qualified intermediary must hold the exchange funds and facilitate the mechanics. “Disqualified persons” cannot serve as QI:

See the QI pillar for the full analysis.

Constructive receipt

If you have the legal right or practical ability to access the exchange funds at any point between the sale and purchase, the IRS considers you to have received the money and the exchange is disqualified.

Common traps:

Always wire directly from closing to the QI's segregated exchange account. Never let the funds touch anything you control.

Boot and partial exchange

Boot is any non-like-kind property or value received in the exchange. Three types:

Boot is taxable in the year of the exchange, up to the amount of realized gain. You don't lose 1031 treatment on the non-boot portion — this is called a partial exchange.

Run boot scenarios on the 1031 exchange calculator.

Reporting: Form 8824

The exchange is reported on IRS Form 8824, filed with your federal tax return for the year of the exchange. Your CPA calculates:

The QI typically provides a closing statement and basic exchange details; the actual tax calculations are the CPA's work.

What changed for 2026

No structural changes to 1031 for 2026. The rules above have been stable since the 2017 TCJA removed personal property. Several points to watch:

Questions about a specific rule?

Every exchange has edge cases the rules don't cleanly cover. I'll walk through yours on a 30-minute call.

Schedule Consultation