CPA-led 1031 exchange guide
1031 Exchange for Real Estate
Real estate is the only asset class that still qualifies for 1031 treatment after the 2017 tax law changes. That makes Section 1031 one of the most powerful long-term wealth tools available to property investors.
Why investors use 1031
Deferring capital gains tax and depreciation recapture lets you redeploy 100% of your equity into the next property — instead of the 70–80% you'd have left after federal, state, and recapture tax. Compounded over decades, that gap is the difference between a single rental and a real portfolio.
What qualifies
U.S. real property held for investment or productive use in a trade or business. Personal residences, dealer inventory, and most foreign property don't qualify.
- Rental homes, duplexes, and small multifamily
- Apartment buildings and commercial properties
- Industrial and warehouse properties
- Raw land held for investment
- Mineral, water, and certain easement interests
Common exchange patterns
Investors typically use 1031 to upsize, diversify, consolidate, or reposition geographically — all without losing equity to tax.
- Selling one big property and acquiring several smaller ones
- Consolidating several small properties into one larger asset
- Moving out of high-tax states or management-heavy assets
- Trading raw land for cash-flowing improved property
Frequently Asked Questions
Does residential rental qualify?
Yes — a single-family rental, duplex, or apartment building held for investment qualifies as long as it isn't your personal residence.
Can I exchange across asset classes?
Yes. Any qualifying real property is like-kind to any other qualifying real property. You can sell raw land and buy a strip mall.