08/11/2026
Did you know you may be able to sell an investment property, buy another one, and delay paying capital gains taxes?
That’s the basic idea behind a 1031 Exchange. Instead of paying the tax immediately, you may be able to reinvest the sale proceeds into another qualifying investment property.
So, what is the actual benefit?
Let’s say an investor sells a rental property and their tax professional estimates they could owe $40,000 in taxes from the sale.
With a properly completed 1031 Exchange, they may be able to defer that $40,000 and keep it invested in the next property.
That doesn’t necessarily mean the tax disappears. It means the money may not be due today, giving the investor more buying power right now.
For example, that $40,000 could:
🏠 Increase the down payment on a larger property
💵 Reduce the amount they need to borrow
🔑 Help them purchase a property with more rental units
📈 Move them into an investment with better income potential
📍 Help them shift into a stronger market
🛠️ Replace a high-maintenance rental with something easier to manage
If $40,000 represented a 25% down payment, it could potentially support about $160,000 in additional purchasing power, depending on the financing.
That’s the whole point: keeping more money invested today so it has the opportunity to produce income and grow over time.
Who should consider asking about a 1031 Exchange?
• Someone selling a rental property that has increased in value
• An owner of investment land or commercial property
• A landlord ready to trade one property for another
• An investor who wants to combine several properties or diversify
• Someone who wants a different location, property type, or level of management
A property used solely as a primary residence normally doesn’t qualify, although a home that has been legitimately converted to rental or investment use may be treated differently.
There’s another strategy worth knowing about, too. Some investors use self-directed retirement accounts to invest in real estate. That is separate from a 1031 Exchange, but the goal can be similar: keeping investment dollars working within a tax-advantaged structure instead of sitting on the sidelines.
These options come with important rules, so the time to ask questions is before selling a property or moving retirement funds.
Know someone who owns a rental, investment land, or commercial property? Share this with them. Understanding their options before they sell could make a meaningful difference in what they can invest next.
This example is for illustration only. Actual taxes, financing, eligibility, and savings will vary. Always consult qualified tax, legal, financial, and 1031 Exchange professionals.