1031 exchanges for Florida rental owners.

A 1031 exchange lets an investor sell one rental and buy another without paying federal tax on the gain at the time of the swap. The tax is deferred, not forgiven: the lower tax basis follows you into the new property. Every rule below is taken from the Internal Revenue Code, the Treasury regulations or the IRS itself, and every source is linked at the end.

1. What a 1031 exchange does

The short answer: under IRC § 1031(a)(1), no gain or loss is recognized when real property held for business or investment is exchanged solely for like-kind real property that will also be held for business or investment. You defer the federal tax on the gain; the replacement property keeps the old tax basis under § 1031(d).

Three consequences follow from the carried-over basis. The gain is still there, waiting for the day you sell without exchanging. Depreciation on the new property starts from the lower carried-over basis, not the price you paid. And if you receive cash or other non-like-kind property in the swap, gain is taxed up to that amount (§ 1031(b)).

Did the law change recently? The amendment notes to § 1031 list nothing after the 2017 tax law (Pub. L. 115-97), which limited exchanges to real property for exchanges completed after December 31, 2017. The IRS page on like-kind exchanges, last reviewed May 1, 2026, states the same: “Section 1031 now applies only to exchanges of real property.”

2. What qualifies, and what does not

The short answer: almost any US real property you hold to rent out or as an investment can be exchanged for almost any other US real property you will hold the same way. The IRS says real properties “generally are of like-kind, regardless of whether they’re improved or unimproved.” Your own home, property held to resell, and property outside the US do not qualify.

3. The 45-day and 180-day deadlines

The short answer: you must identify the replacement property in writing within 45 days after you transfer the property you are selling, and receive it by the earlier of 180 days after that transfer or the due date, with extensions, of your tax return for that year (§ 1031(a)(3)). Both clocks start on the same day; the 45 days sit inside the 180.

1. Day 0: the sale of the property you are giving up closes. The proceeds go to a qualified intermediary, not to you (section 4).
2. By day 45: identify the replacement property in a written document you sign, delivered to the intermediary or to the seller of the replacement property, not to your own agent or adviser (Treas. Reg. § 1.1031(k)-1(c)(2)). Describe real property by legal description, street address or a distinguishable name.
3. By day 180, or your return due date if earlier: close on the replacement property. A sale late in the year can hit the return due date first, so ask your tax adviser whether to extend the return.
4. With that year’s return: report the exchange on Form 8824.

Property that misses either deadline is treated as not like-kind, and the gain is taxed. The deadlines are written into the statute itself.

How many properties you may identify

These rules are in Treas. Reg. § 1.1031(k)-1(c)(4). In practice most individual investors identify one main property and one or two back-ups under the three-property rule.

4. Why you need a qualified intermediary

The short answer: if the sale money is paid to you, credited to you or made available for you to draw on before you receive the replacement property, the regulations treat the deal as a sale, not an exchange (Treas. Reg. § 1.1031(k)-1(f)). A qualified intermediary holds the money under a written exchange agreement that limits your right to it.

Not just anyone can be your intermediary. Under Treas. Reg. § 1.1031(k)-1(k), a disqualified person includes anyone who was your employee, attorney, accountant, investment banker or broker, or real estate agent or broker within the two years before the first sale, along with certain relatives and related businesses. Services for the exchange itself, and routine title, escrow or trust services from a title or escrow company or a financial institution, do not count. Your regular real estate agent or accountant generally cannot hold the money for you.

5. Cash and debt: what gets taxed anyway

The short answer: anything you receive that is not like-kind real property, including cash taken out at closing, is taxed up to the amount of your gain (§ 1031(b)). Debt counts too: on Form 8824, net liabilities the other side takes over from you are treated like cash received. Exchange expenses reduce that amount.

A simple way to see it: if you sell with a mortgage and buy with a smaller one, and you do not add cash to cover the difference, the reduction in debt can be taxed. Your tax adviser and intermediary will run the numbers on the Form 8824 lines before closing, which is the time to change them.

6. Vacation homes, and moving into the new property

The short answer: the IRS will not challenge a dwelling unit as investment property if, for 24 months before (or after) the exchange, you rent it at a fair rental for at least 14 days in each 12-month period and your own use stays at or under the greater of 14 days or 10% of the days rented (Rev. Proc. 2008-16).

The safe harbor is optional. Missing it does not automatically disqualify a property, but it leaves the question to the facts. If you report an exchange expecting a replacement home to meet the test and it later does not, the revenue procedure says to file an amended return if necessary.

If you later want to live in the replacement property and sell it as your home, a second rule applies. The home-sale exclusion in IRC § 121 ($250,000, or $500,000 on most joint returns, after two years of ownership and use as a principal residence) does not apply to a property acquired in a 1031 exchange if it is sold within five years of acquiring it (§ 121(d)(10)).

7. Exchanges with family and related businesses

The short answer: you can exchange with a related person, but if either of you disposes of the property received within two years after the last transfer, the deferral is lost and the gain is taxed in the year of that disposition (§ 1031(f)). Exceptions include a disposition after the death of either party and transactions without tax avoidance as a principal purpose.

Form 8824 must also be filed for the two years following the year of a related-party exchange.

8. What Florida still charges

The short answer: a 1031 exchange defers federal income tax. Florida has no personal income tax for an individual owner, so there is no state tax on the gain to defer. Florida’s documentary stamp tax on the deed and the property-tax reassessment after a purchase are separate rules, and a 1031 exchange does not switch them off.

The last row surprises owners most. A rental held for years may be assessed well below its market value under the 10% non-homestead cap. The replacement property starts again at just value, so budget its property tax from the new assessment, not the seller’s bill. We checked the history lines on flsenate.gov (2026 Statutes): § 193.1554 was last amended in 2021, § 201.02 in 2019 and § 201.031 in 2009.

9. If you own from outside the US

The short answer: a Florida rental can only be exchanged for other US real property; US and foreign real property are not like-kind (§ 1031(h)). A foreign seller can still face FIRPTA withholding when the old property is sold, so the exchange paperwork needs to start well before listing.

The IRS lists two routes that can remove or reduce FIRPTA withholding for a transaction that qualifies for nonrecognition: a written notice from the seller under Treas. Reg. § 1.1445-2, or a withholding certificate applied for in advance. Which one fits a deferred exchange through an intermediary is a question for your US tax adviser. Our guide for owners abroad covers FIRPTA and how rent is taxed while you own.

10. Where a property manager fits

The short answer: a manager does not run your exchange and cannot hold your sale money; the intermediary, your tax adviser and your title company do that. What a manager handles is the property on both sides: a clean hand-over of the old tenants and deposits, and getting the replacement property leased and documented as a rental.

1. Before you list: give tenants the notices their lease and Florida law require, and decide whether to sell tenant-occupied.
2. At the sale: tenant deposits move to the buyer with an accounting under Fla. Stat. § 83.49(7).
3. Buying the replacement: if it comes with tenants, our guide to buying a tenant-occupied rental covers what transfers at closing.
4. After closing: lease the replacement at a fair rental, and keep the monthly statements and leases. They are the record that the property is held as an investment.

CIMCO is a Hollywood, Florida company managing rentals across South Florida at a flat 8% management fee, the same for every owner. We manage homes in Hollywood, Fort Lauderdale, Pembroke Pines, Miami and the rest of Broward County; our services page sets out what full-service management includes. We do not act as a qualified intermediary or give tax advice. If you are weighing a replacement property, the rental analysis is free.

This is general information, not legal advice. Florida landlord–tenant law is detailed and fact-specific, and statutes change. Verify anything you intend to act on against the current Florida Statutes Chapter 83, Part II, and consult a Florida attorney before serving notices or filing an eviction.