Selling a rental house with a 1031 exchange: the 45 and 180 day rules

You own a rental house in Florida or Arizona, and you want to sell it. If it has gone up in value since you bought it, the sale can bring a large tax bill. A 1031 exchange is a way to put that tax off: you sell the rental and buy other investment real estate with the money, on a strict timeline, and the tax waits until a later sale.

The rule works for a single rental house as well as for a large building. It also has fixed deadlines, and one mistake can make the whole sale taxable.

This post explains how the rules work and how a cash sale fits into them. It gives no tax or legal advice. Talk to a tax adviser before you list or accept an offer, because some steps must happen before the sale closes.

What a 1031 exchange is

The rule takes its name from section 1031 of the Internal Revenue Code. Subsection (a)(1) says "no gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment," when it is exchanged for like-kind real property that you will also hold for business or investment.

When you sell to a buyer who pays money, the exchange is a deferred exchange: you sell your rental, a qualified intermediary holds the money, and the intermediary uses it to buy your replacement property.

What qualifies

Property you sell	Qualifies?	Why
A house you rent out	Yes, if held for investment or business use	Section 1031(a)(1)
Land you hold for investment	Yes	Section 1031(a)(1)
The home you live in	No	The Form 8824 instructions say section 1031 does not apply to property "used solely as your personal residence"
A house you bought to fix and resell	No	Section 1031(a)(2) excludes "real property held primarily for sale"

The replacement must also be real property you will hold for business or investment. A rental house can be exchanged for another rental house, a small apartment building, a store building or investment land.

If the house was once your home and later a rental, both rules may matter. The home sale exclusion in IRS Publication 523 can apply when you lived there 2 of the 5 years before the sale. Our post on keeping a house as a rental or selling it explains that clock. A tax adviser can tell you which rule fits your sale, or whether both can apply.

The two deadlines

Section 1031(a)(3) sets two dates, both counted from the day you transfer the property you sold:

Deadline	Rule
Day 45	Identify the replacement property in writing
Day 180, or your tax return due date if earlier	Receive the replacement property

The second deadline is "180 days after the date on which the taxpayer transfers the property," or the due date of your tax return for that year, with extensions, whichever is earlier. For a sale late in the year, the April tax date can come first. Filing an extension for your return keeps the full 180 days available.

Count both dates from the day of closing. Mark them on a calendar the day you sign the sale contract, and count again on the day you close.

How to identify the replacement

The Form 8824 instructions say the replacement property must be "designated in writing" in a document you sign, or in a written agreement, and sent to the person the rules require before day 45. "Real property should be described using a legal description, street address, or distinguishable name." A vague note such as "a duplex in Tampa" is not enough.

If you close on the replacement before day 45, the instructions say you are treated as meeting the identification rule.

How many properties you can name

You may want backups in case the first choice falls through. Treasury regulation section 1.1031(k)-1(c)(4) limits how many you can name:

• The 3-property rule. Any three properties, whatever their value.
• The 200 percent rule. Any number of properties, as long as their total fair market value does not exceed 200 percent of the value of the property you sold.
• The 95 percent rule. If you name more than either rule allows, you must actually receive identified property worth at least 95 percent of the total value of everything you named.

The qualified intermediary holds the money

The money from your sale should never reach your bank account. The Form 8824 instructions say your "rights to receive, pledge, borrow, or otherwise obtain the benefits of money" held by the intermediary must be expressly limited. The qualified intermediary is "one safe harbor": when one is used, the sale and the purchase are treated as one like-kind exchange.

Hire the intermediary before the sale closes. Your intermediary and the title company then prepare the closing papers so the sale money goes to the intermediary.

Who cannot be your intermediary

Treasury regulation section 1.1031(k)-1(k)(2) treats some people as your agent, and so as a "disqualified person." That includes anyone who acted as your employee, attorney, accountant, investment banker or broker, or real estate agent or broker within the 2 years before the sale. Routine title insurance, escrow and trust services from a title or escrow company do not count.

So your usual real estate agent or your family lawyer generally cannot hold the money. Use an intermediary that does this work as its business, and ask how it protects the money it holds.

What can still be taxed

An exchange can be partly taxable. Section 1031(b) says that if you receive money or other property that is not like-kind, "the gain, if any, to the recipient shall be recognized," up to the amount of that money and the value of the other property. Investors call this "boot."

Common ways it happens:

• You keep part of the sale money for yourself.
• You buy a replacement for less than you sold for, and the intermediary pays you the rest.
• You use exchange money for costs that are not part of the purchase.

Ask your tax adviser to work out the replacement price and the loan amount you need so that nothing is left over as taxable money.

Exchanges with family

Section 1031(f) adds limits for an exchange with a related person. If either side disposes of the property "before the date 2 years after the date of the last transfer which was part of such exchange," the tax benefit is lost. The Form 8824 instructions list a "spouse, child, grandchild, parent, grandparent, brother, sister" and some related companies as related parties. Buying your replacement from a relative needs advice first.

Reporting

The Form 8824 instructions say "you must file Form 8824 with your tax return for that year" in which you transferred property in a like-kind exchange. After an exchange with a related party, you file it again for the 2 years that follow.

A timeline for selling one rental house

Here is one order of steps that keeps the dates under control:

1. Before you list or accept an offer. Meet a tax adviser. Decide whether an exchange makes sense for your numbers. Start looking at replacement properties.
2. Before you sign the sale contract. Choose a qualified intermediary. Tell the buyer and the title company that you plan an exchange.
3. At closing (day 0). The sale money goes to the intermediary.
4. By day 45. Send the signed, written identification of up to three properties, with clear descriptions.
5. By day 180, or your tax return date if earlier. Close on the replacement property. The intermediary sends the money to the seller.
6. When you file taxes. File Form 8824 with your return.

Step 4 has the shortest deadline. If you have no replacement in mind on the day you sell, you have 45 days to find one. Pick the closing date for your sale after you have found two or three possible replacements.

Mistakes that make the sale taxable

• Touching the money. A check made out to you, even for a day, can end the exchange.
• Starting after closing. The intermediary must be in place before the sale closes.
• Missing day 45 or day 180. Section 1031(a)(3) treats property identified or received after these dates as not like-kind.
• Naming property loosely. Use the address or legal description.
• Using your own agent or lawyer as intermediary when they worked for you in the last 2 years.
• Exchanging a house held for resale, such as a flip, or the home you live in.
• Buying for less than you sold. The difference can come back to you as taxable money.

How BIMINIO buys rental houses

We buy rental houses for cash in Tampa, Miami, Orlando, Lakeland, Phoenix and Glendale, with tenants or empty, in any condition. Tell us on the first call if you plan an exchange, so your intermediary and the title company can prepare the closing papers.

A cash offer is below full market value. In return, the sale does not wait on a mortgage approval, and you pick a closing date from 7 to 35 days out. That choice helps you line the sale up with your search for a replacement and your 45-day and 180-day dates. You get a written offer within 24 hours, with the comparable sales we used and proof of funds, and we pay the closing costs.

To start, fill in the form on this page, or call us at (813) 729-8998 in Florida or (602) 387-7772 in Arizona. If you are tired of being a landlord and want to sell without buying again, our page for tired landlords covers that path.

Sources

• 26 U.S. Code section 1031: exchange of real property held for productive use or investment (Legal Information Institute, Cornell Law School), read November 9, 2026
• 26 CFR section 1.1031(k)-1: treatment of deferred exchanges (Legal Information Institute, Cornell Law School), read November 9, 2026
• IRS, Instructions for Form 8824 (2025), Like-Kind Exchanges, read November 9, 2026
• IRS Publication 523 (2025), Selling Your Home, read November 9, 2026

Situations this helps with

• Tired landlord, problem tenants

Guides

• Selling as is: what to tell the buyer
• Property taxes when you sell
• Selling a rental with tenants

This post is general information. BIMINIO does not give legal, tax or financial advice.