1031 Exchange Trends in 2026
While we saw some major changes to the Internal Revenue Code (IRC) in 2025, one key IRC provision that did not change last year was Section 1031. As a result, conducting like-kind exchanges under Section 1031 remains a viable option for indefinitely deferring federal tax liability on gains from the sale of appreciated real estate, and there are some trends that suggest we may see a high volume of like-kind exchange activity in 2026. Learn more from the experienced 1031 exchange specialists at 1031 National Services:
1. Interest Rate Stabilization
Although interest rates remain above their record lows during the COVID-19 pandemic, they are still relatively low compared to what we’ve seen over the past several decades. With interest rates stabilizing in recent months, we’re seeing greater certainty in the real estate market, which is helping drive demand.
Additionally, there is a general consensus that interest rates will move lower in 2026 (though, of course, there are no guarantees). This is helping fuel optimism among owners considering 1031 exchanges this year. At the same time, the feeling that any downward adjustments will be relatively modest is stopping many buyers from taking a wait-and-see approach.
2. Real Estate Values Are Leveling Off
Along with historically low interest rates, we also saw unprecedented growth in real estate values during the COVID-19 pandemic. For example, median home prices increased by about 45 percent in just five years.
Now, though, real estate values are starting to level off. For property owners who bought during the pandemic, this means that both (i) selling in 2026 will allow them to lock in their substantial gains and (ii) since sales prices have stabilized, now may be a good time to buy. For those looking at a substantial tax bill on their substantial gains, a 1031 exchange will allow for indefinite tax deferral.
3. Growing Interest in Passive Real Estate Investment
In recent years, we have seen an explosion in retail-level investing, and several apps now allow individuals to easily trade from their phones. Alongside this, we have seen growing interest in passive real estate investment.
While passive real estate investment can take many forms, most have one thing in common: They allow investors to benefit from the tax-deferral provisions of Section 1031. From syndication arrangements to Delaware statutory trusts (DSTs), there are various options that allow eligible investors to benefit from the real estate market without the burdens of direct property ownership and management.
4. Growing Interest in Build-to-Suit 1031 Exchanges
With inventory levels remaining relatively low in many parts of the country, we have also seen growing interest in build-to-suit 1031 exchanges. Also called improvement exchanges, these 1031 exchanges involve using a portion of the proceeds from the sale of a relinquished property to improve a replacement property for a specific commercial use.
By default, any proceeds not directly reinvested in the purchase of a replacement property are classified as boot, and they are subject to immediate federal income taxation. However, by participating in improvement exchanges, investors can allocate up to 100 percent of their sale proceeds to buying and refurbishing an existing property.
5. Strength in Real Estate-Reliant Industries
Another trend driving strong interest in 1031 exchanges in 2026 is the strength of many real estate-reliant industries. These include everything from oil and gas production to farming, and from hospitality and gaming to multi-family residential and apartment dwellings.
For real estate investors, this strength means opportunities to lease (or use directly) new properties. By conducting 1031 exchanges, investors can get out of unprofitable properties in underperforming industries and into new properties that are better positioned for long-term viability.
Of course, while these trends might point to 2026 being a good year for conducting like-kind exchanges, every situation is unique. All investors need to make informed decisions based on their individual circumstances, including their eligibility for tax deferral under Section 1031.
Contact the 1031 Exchange Specialists at 1031 National Services
At 1031 National Services, we help real estate investors across the country execute like-kind exchanges, including delayed, reverse, and improvement exchanges for all property types. If you would like to speak with one of our 1031 exchange specialists in confidence, give us a call at 888-872-1031 or tell us how we can help online today.