Can you avoid capital gains tax with a 1031 exchange?

You can avoid capital gains tax with a 1031 exchange indefinitely. Once you sell a property and don’t roll over the proceeds into a new 1031 exchange, however, the tax bill will come due. What is the two-year rule for 1031 exchanges?

What is a 1031 exchange?

Know the Rules A 1031 exchange is a swap of one real estate investment property for another that allows capital gains taxes to be deferred. The term—which gets its name from Section 1031 of the Internal Revenue Code (IRC) —is bandied about by real estate agents, title companies, investors, and more.

Can I use a 1031 exchange for a real estate sale?

As an investor, you can use a 1031 exchange to pump proceeds from a real estate sale directly into another property, delaying capital gains taxes.