Why is it called a 1031 exchange?

The name comes from Section 1031 of the Internal Revenue Code, the part of the tax law that created the rule. You may also hear it called a like-kind exchange or a Starker exchange.

Does the tax ever go away completely?

The tax is postponed, not forgiven — with one big exception. If you hold exchanged property until death, your heirs may receive it at a stepped-up basis equal to its market value, which can erase the deferred gain under current law.

Can I do a 1031 exchange on stocks or equipment?

No. Since the 2018 tax law changes, 1031 exchanges are limited to real estate. Stocks, bonds, equipment, vehicles, and cryptocurrency do not qualify.

How many times can I do a 1031 exchange?

There is no limit. Many investors chain exchanges together for decades, rolling one property into the next while the deferred tax compounds in their favor.

What Is a 1031 Exchange? A Plain-English Guide

A 1031 exchange is an IRS rule (Section 1031 of the tax code) that lets you sell an investment property and buy another one without paying tax on your profit right away. Instead of the IRS taking its cut when you sell, the tax bill gets postponed — rolled forward into the new property, where it waits until you eventually sell without exchanging.

The logic behind the rule: if you sold a rental and immediately put every dollar into another rental, you haven't really cashed out. Your investment just changed addresses. So the tax code lets the gain ride.

A quick example

Example You bought a rental for $350,000 years ago and can sell it today for $600,000. Between capital gains tax and the tax on your past depreciation write-offs, selling outright might cost you $70,000–$90,000. With a 1031 exchange, you roll the full sale into a $650,000 property instead — and that entire tax bill is postponed. All of your equity keeps working for you.

Run your own numbers →The 1031 exchange calculator shows exactly how much tax you could postpone

What qualifies

Both properties must be real estate held for investment or business use in the United States — rentals, apartment buildings, offices, retail, farmland, raw land. The definition of "like-kind" is far looser than people expect: you can trade a duplex for farmland, or a strip mall for an apartment building. What doesn't qualify: your own home, property you flip quickly for resale, and (since 2018) anything that isn't real estate.

The three rules that matter most

Never touch the money. Sale proceeds must go straight to a neutral middleman called a qualified intermediary, who holds them until your purchase closes. If the money reaches your account, even for a day, the exchange is dead.
Hit the deadlines. You have 45 days after your sale closes to name your new property in writing, and 180 days to finish buying it. Calculate your dates — there are no extensions.
Trade equal or up. To postpone all the tax, buy a property that costs at least as much as the one you sold, and reinvest all your cash. Anything you keep back is "boot" and gets taxed now. The full list is in the rules guide.

Postponed, not erased — usually

The deferred tax doesn't vanish; it travels with you into the new property through a lower cost basis. Sell that property without exchanging and the whole accumulated bill comes due. But two things make deferral remarkably powerful anyway: you can exchange again and again ("swap till you drop"), and if you hold until death, your heirs may receive the property at its current market value — potentially erasing the deferred gain entirely under current law.

What an exchange costs

A standard delayed exchange typically runs $750–$1,500 in qualified intermediary fees, plus your normal closing costs on both transactions. Against a five- or six-figure tax deferral, the fee is rarely the deciding factor — but for small gains, sometimes just paying the tax is the smarter move.