What Are the Requirements for a 1031 Exchange in 2026?

Conducting a 1031 exchange (or “like-kind exchange”) remains a viable tax deferral strategy for businesses and real estate investors in 2026. Eligible companies and individuals that conduct like-kind exchanges can defer their capital gains tax liability indefinitely—including through subsequent exchanges. Keep reading to learn about the requirements for conducting a like-kind exchange in 2026 from our 1031 exchange specialists.

7 Key Like-Kind Exchange Requirements for 2026

While 1031 exchanges offer significant tax advantages, they are subject to stringent federal requirements. Failure to meet any of these requirements can result in loss of like-kind exchange treatment and tax deferral eligibility. The key requirements for conducting a federally compliant like-kind exchange in 2026 are as follows:

1. The Exchange Must Involve Real Property

While Section 1031 used to cover transactions involving both personal property and real property, this is no longer the case. In 2026, it is only possible to conduct a 1031 exchange with real property. If a taxpayer receives personal property in an exchange, this personal property will generally be classified as “boot” that is subject to immediate taxation.

2. The Exchange Must Involve Like-Kind Property

Section 1031 applies exclusively to exchanges involving real property “of like kind.” But, as the Internal Revenue Service (IRS) explains, “[r]eal properties generally are of like-kind[] regardless of whether they’re improved or unimproved.” In other words, essentially all types of real estate are considered to be like-kind property for purposes of Section 1031.

With that said, there are some important exceptions. Most notably, real estate in the United States is not considered to be “of like kind” with real estate in other countries.

3. Both Properties Must Be Held for Business or Investment

Another key requirement under Section 1031 is that both properties involved in an exchange must be, “held for productive use in a trade or business or for investment.” This means that personal residences, vacation homes and flip properties generally do not qualify. However, there are steps that homeowners and investors can take to bring their properties under Section 1031 if they wish to do so.

4. The Replacement Property Must Be Identified Within 45 Days

Under Section 1031, once a taxpayer sells one property involved in an exchange (the relinquished property), the taxpayer has up to 45 days to identify a replacement property. To ensure that they meet this requirement, many taxpayers will identify a replacement property before closing on the sale of their relinquished property.

5. The Acquisition of the Replacement Property Must Close Within 180 Days

In addition to meeting the 45-day “identification” requirement, taxpayers seeking to indefinitely defer their tax liability under Section 1031 must also close on the acquisition of their replacement property within no more than 180 days of closing on the sale of their relinquished property. For those who have concerns about meeting this deadline, conducting a reverse exchange ensures that they won’t run out of time.

6. The “Same Taxpayer” Must Be Involved in Both Transactions

One of the least well-known—and least well-understood—requirements under Section 1031 is the “same taxpayer” rule. This rule says that the “same taxpayer” must participate in both transactions involved in an exchange.

While this is a strict requirement, similar to “like-kind” property, “same taxpayer” is defined broadly. For example, a taxpayer who owns a relinquished property through a single-member LLC can establish a different single-member LLC to own the replacement property, and spouses and business owners can be added (or removed) as co-owners of replacement properties in appropriate circumstances.

7. The Exchanger Must Use a Qualified Intermediary

Under Section 1031, if a taxpayer seeking to conduct a like-kind exchange comes into possession of the proceeds from the sale of a relinquished property, this immediately and irrevocably precludes like-kind exchange treatment. To avoid coming into possession of these proceeds, taxpayers must work with a qualified intermediary. Conducting a reverse exchange requires the involvement of a qualified intermediary as well.

While these are not all of the requirements for conducting a 1031 exchange in 2026, they are among the most important. The rules for conducting 1031 exchanges are complex, and this makes it important to work closely with a team of experienced 1031 exchange specialists throughout the process.

Contact the 1031 Exchange Specialists at 1031 National Services

Our 1031 exchange specialists have decades of experience guiding clients through the like-kind exchange process. If you would like to know more, we invite you to get in touch. Call 888-872-1031 or contact us online to schedule a free consultation at 1031 National Services.