Why identification rules matter
In a 1031 exchange, you must deliver a written identification of potential replacement properties to your qualified intermediary within 45 days of the sale. The IRS doesn't allow unlimited identification — you must follow one of three approved rules, or the exchange fails.
The 3-property rule
The 3-property rule lets you identify up to three properties regardless of their total fair market value. This is the most commonly used rule — it gives you backup options without any value constraint, and the simplicity makes it the default choice for most investors.
The 200% rule and 95% rule
The 200% rule lets you identify any number of properties, as long as their combined fair market value doesn't exceed 200% of the value of the relinquished property. The 95% rule imposes no value cap but requires that you actually close on 95% of the total FMV you identified — an extremely high bar rarely used in practice. Stick with the 3-property rule unless you specifically need more than three options.
Frequently asked questions
How many properties can I identify in a 1031?
Under the 3-property rule, up to 3 — regardless of value. Under the 200% rule, any number with combined FMV at or below 200% of the sale price.
Must I close on every identified property?
No. You must close on at least one within 180 days. Identifying up to 3 gives you backup options.
Sources
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.