Real Estate Tax Calc
The two clocks
From the day you close the sale, you have 45 days to formally identify replacement property, and 180 days to close on it. Both clocks start on the same day and run concurrently — there's no extension for weekends or holidays.
Qualified intermediary
You can't touch the sale proceeds. A qualified intermediary (QI) must hold the funds between the sale and the purchase; taking constructive receipt of the cash disqualifies the exchange.
Equal or greater value
To fully defer tax, the replacement property should be of equal or greater value, and you should reinvest all the equity. Taking cash out ("boot") is taxable to that extent.
How the two deadlines actually count
Both clocks start on the day your relinquished property closes (the day title transfers), and both are hard, statutory deadlines under IRC § 1031(a)(3). The 45-day identification period is calendar days — weekends and holidays included, with no extension if day 45 lands on a Sunday. The 180-day exchange period is not "180 days after the 45th day"; it runs 180 days from the same original closing date, so the two windows overlap.
One easily-missed trap: your exchange period ends on the earlier of 180 days or the due date (including extensions) of your tax return for the year the sale occurred. If you sell in late November or December, you must file an extension (Form 4868 or 7004) to preserve the full 180 days — otherwise your window closes on the April filing deadline. The only deadline relief comes from IRS-declared federal disaster areas, which can postpone both clocks.
The three identification rules
Because you rarely close instantly, the rules limit how many properties you can keep in play. You must satisfy one of three tests in writing by day 45: the Three-Property Rule (identify up to three properties of any value); the 200% Rule (identify any number of properties as long as their combined fair market value doesn't exceed 200% of what you sold); or the 95% Rule (identify more than that, but only if you actually acquire at least 95% of the total value identified).
The identification must be unambiguous — a legal description or street address delivered in writing to your qualified intermediary (not to your own attorney or agent). You can revoke and re-identify freely up until midnight on day 45; after that the list is locked, and buying anything not on it generally fails the exchange.
A worked timeline example
Suppose you close the sale of a duplex on March 1. Day 45 is April 15 — your identification deadline. Day 180 is August 28 — your deadline to close on the replacement. If you identify three candidate properties by April 15 using the Three-Property Rule, you then have until August 28 to close on one or more of them.
Now suppose you instead close on December 1. Day 180 would be roughly May 30 of the next year — but your tax return is due April 15. Unless you file an extension, your exchange period is cut short to April 15. Filing the extension restores the full 180 days. This single step saves more failed exchanges than almost any other.
Equal-or-greater-value, in three parts
To defer all the tax, the replacement generally must clear three hurdles: buy property of equal or greater value (price at least the net sale price of what you sold); reinvest all the net equity the QI is holding; and carry equal or greater debt (or replace any debt shortfall with new cash). Fall short on any one and the gap becomes taxable boot — cash boot if you pocket proceeds, mortgage boot if your new loan is smaller than the old one.
A partial exchange is allowed: you can pull some cash out and still defer the rest. You simply recognize gain up to the boot received. Many investors do this intentionally to cover taxes or take chips off the table, accepting a partial tax bill in exchange for liquidity.
What qualifies as like-kind — and what doesn't
For real estate, "like-kind" is broad: you can exchange an apartment building for raw land, a retail strip for a warehouse, or a rental house for a fractional interest in a Delaware Statutory Trust. Both properties must be held for investment or productive use in a trade or business. What does not qualify: your primary residence, a second home used mainly for personal enjoyment, property held primarily for resale (dealer/flip inventory), and — since the 2017 Tax Cuts and Jobs Act — personal property and foreign real estate. U.S. real property is not like-kind to real property located outside the United States.
Reverse and improvement exchanges
Two variations bend the timing. In a reverse exchange, you acquire the replacement before selling the relinquished property; an "exchange accommodation titleholder" parks title under the safe harbor of Rev. Proc. 2000-37 while you sell within 180 days. In an improvement (or build-to-suit) exchange, exchange funds are used to construct or renovate the replacement — but all improvements must be completed and the property received within the same 180-day window to count toward the reinvestment. Both are more expensive and demand a specialized QI, but they solve real sequencing problems.
Common mistakes that blow the exchange
The classic failures: touching the proceeds (constructive receipt disqualifies the whole exchange, so the QI must be engaged before closing); missing day 45 because you assumed weekends didn't count; a December sale with no filing extension; identifying vaguely ("a property in Austin") instead of by address; and trading down in value or debt and being surprised by boot. Set the QI up early, calendar both deadlines the day you close, and get identifications in writing well before the 45th day.
Holding-period and 'held for investment' requirements
Section 1031 requires that both the relinquished and replacement properties be held for productive use in a trade or business or for investment. There's no bright-line holding period in the statute, but the IRS looks at your intent. Property bought to flip (dealer inventory) doesn't qualify, and a replacement you move into or sell almost immediately invites scrutiny. Many practitioners suggest holding at least a year or two, and reporting rental income on the property, to demonstrate investment intent. Two tax years of ownership straddling the exchange is a common conservative benchmark.
Related-party exchanges carry an extra rule: under IRC § 1031(f), if you exchange with a related party, both of you generally must hold the properties for two years afterward, or the deferral can be unwound.
Special rules for vacation homes and converted residences
A second home used mainly for personal enjoyment doesn't qualify, but a genuine vacation rental can. IRS Rev. Proc. 2008-16 provides a safe harbor: in each of the two years before the exchange, you rent the property at fair market value for at least 14 days and limit personal use to the greater of 14 days or 10% of the days rented. Meet that on both the old and new property and the IRS won't challenge the investment-use requirement.
You can also combine strategies over time: convert a former primary residence to a rental, exchange it, or after an exchange eventually convert a replacement rental to a primary home and later use the Section 121 exclusion — subject to a required five-year ownership period and proration rules for property acquired in a 1031 exchange.
Reporting the exchange to the IRS
Every 1031 exchange is reported on Form 8824, Like-Kind Exchanges, filed with your return for the year the relinquished property was transferred. The form captures the dates (to prove you met the 45- and 180-day deadlines), the values of the properties given and received, any boot, the realized and recognized gain, and your carryover basis in the replacement. Because the deferred gain and the old depreciation history carry into the new property, keeping the completed Form 8824 and your basis worksheets is essential — you'll need them years later when you finally sell or exchange again. If you received any boot, that recognized gain also flows to Form 4797 and Schedule D.
A pre-closing checklist
Before you close the sale, line up the essentials: engage a qualified intermediary in advance so you never take receipt of funds; add cooperation language to your sale contract; calendar day 45 and day 180 from the closing date; decide which identification rule (three-property, 200%, or 95%) you'll use; and if you're selling late in the year, plan to file a tax-return extension to preserve the full 180 days. Start hunting for replacement property before the sale closes — 45 days disappears fast — and confirm your financing can close within the window.
Frequently asked questions
What are the 1031 exchange deadlines?
45 days to identify replacement property and 180 days to close, both from the sale date.
Do I need a qualified intermediary?
Yes. You cannot receive the sale proceeds directly; a QI must hold them.
What happens if I miss the 45-day deadline?
The exchange generally fails and the gain becomes taxable.
Can the 45-day or 180-day deadline be extended?
Generally no. The only relief is for taxpayers affected by an IRS-declared federal disaster, which can postpone both deadlines. Weekends and holidays do not extend them.
How many replacement properties can I identify?
Up to three of any value (Three-Property Rule), any number totaling no more than 200% of the sold value (200% Rule), or more than that only if you acquire at least 95% of the identified value (95% Rule).
Does my primary home qualify for a 1031 exchange?
No. A 1031 exchange is only for property held for investment or business use. A primary residence uses the separate Section 121 exclusion instead.
Sources
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.