If you’re searching for “Form 1031,” you’re likely looking for one of two things and neither is officially called Form 1031.
Quick Clarification
- If you sold an investment property and want to defer capital gains taxes, you need IRS Form 8824 (Like-Kind Exchanges) under Section 1031.
- If you’re a Small Business Investment Company (SBIC), you need SBA Form 1031 (Portfolio Financing Report)
This guide covers both, with the bulk focused on the 1031 exchange, what 90%+ of searchers actually need. By the end, you’ll know which form to file, the rules you must follow, and how to file IRS Form 8824 line by line.
What Is “Form 1031”? Clearing Up the Confusion
“Form 1031” is one of the most common misconceptions in real estate tax. It comes from Section 1031 of the Internal Revenue Code — the law that lets investors defer capital gains by exchanging one investment property for another.
But there is no IRS form numbered 1031. There are two real forms people often mean:
- IRS Form 8824 (Like-Kind Exchanges): Filed with your tax return to report a 1031 exchange. This is what most searchers need.
- SBA Form 1031 (Portfolio Financing Report): Used only by licensed Small Business Investment Companies. Unrelated to real estate.
There’s also a Texas HHS Form 1031 (case record transfer), but it’s almost certainly not relevant if you’re reading this.
What Is a 1031 Exchange?
A 1031 exchange also called a like-kind exchange or Starker exchange, lets real estate investors defer capital gains taxes by reinvesting proceeds from a sold investment property into another similar one.
Named after Section 1031 of the Internal Revenue Code, the provision has existed since 1921. A properly executed exchange defers four major tax obligations:
- Federal capital gains tax (up to 20%)
- State income tax (varies, up to ~13%)
- Net Investment Income Tax of 3.8%
- Unrecaptured Section 1250 depreciation recapture (up to 25%)
For a high-tax-state investor, combined deferred tax can exceed 35% of the gain.
Key 2018 change: Since the TCJA, only real property held for investment or business use qualifies. Personal property (equipment, vehicles, art) no longer qualifies. Primary residences and second homes never did.
Who It’s For (and Who It’s Not)
Good fit: Buy-and-hold investors upgrading properties, landlords consolidating assets, investors transitioning to passive ownership (e.g., DSTs), estate planners (heirs get a stepped-up basis).
Not for: House flippers, primary residence sellers (use Section 121 instead), dealer-status taxpayers, or anyone wanting to cash out personally.
The 4 Types of 1031 Exchanges
| Type | How It Works | Best For |
| Simultaneous (Direct Swap) | Both properties close on the same day | Rare — needs a direct trading partner |
| Delayed (Forward) Exchange | Sell first, then buy within 180 days | Most common — 90%+ of exchanges |
| Reverse Exchange | Buy replacement property first, then sell relinquished | Hot markets, perfect replacement found |
| Construction/Improvement Exchange | Use proceeds to build or improve replacement property | Customizing to your specs |
The Critical 1031 Exchange Rules
Miss any of these and the exchange fails meaning the entire gain becomes immediately taxable.
The 45-Day Identification Rule
You have 45 calendar days from the sale of your relinquished property to identify replacements in writing, signed by you and delivered to the seller of the replacement property or your QI. Three identification methods:
- 3-Property Rule: Up to three properties of any value
- 200% Rule: Any number of properties as long as combined FMV ≤ 200% of what you sold
- 95% Rule: More properties allowed, but you must actually acquire ≥ 95% of total identified value
Use full street addresses or legal descriptions never nicknames.
The 180-Day Closing Rule
Close on the replacement property within 180 days of the original sale, or by your tax return due date (including extensions), whichever is earlier. No extensions for weekends or holidays. The only exception is a federally declared disaster.
The Like-Kind Property Requirement
“Like-kind” is broader than most investors realize. Qualifying property includes rental houses, commercial buildings, vacant land, industrial warehouses, and apartment complexes. Disqualified property includes primary residences, second homes, inventory (flips), stocks, partnership interests, and foreign property.
Equal or Greater Value Rule
The replacement must equal or exceed the sale price of the relinquished property not just the gain. Any shortfall in value, debt, or equity is “boot” and is taxable.
Same Taxpayer Rule
The same legal entity that sold must acquire. Get this wrong with LLCs, partnerships, or trusts and the exchange fails.
Qualified Intermediary (QI) Requirement
You cannot touch the proceeds. An independent QI must hold funds in escrow. Related parties and agents of the taxpayer are disqualified from serving as QI this includes your CPA, attorney, agent, or any related party.
How to File IRS Form 8824 (Step-by-Step)
When and Where to File
File Form 8824 with your tax return for the year the relinquished property was transferred — even if no gain is recognized. Attach it to Form 1040 (individuals), 1065 (partnerships), 1120 (corporations), or 1120-S (S-corps).
If your exchange straddles two tax years, file with the return for the year of the sale.
The Four Parts of Form 8824
Part I — Information on the Like-Kind Exchange
Lines 1–2: Descriptions of property given up and received (full addresses; note the form specifies only real property should be described here)
Line 3: Date you originally acquired the relinquished property
Line 4: Date you transferred it
Line 5: Date the replacement was identified (must be ≤ 45 days)
Line 6: Date you actually received the replacement (must be ≤ 180 days)
Line 7: Whether the exchange involved a related party
Part II — Related Party Exchange Information
Complete only if the exchange was with a related party. Both parties must hold for 2 years post-exchange or the deferred gain becomes taxable. You must also file Form 8824 again for the two years following the exchange.
Part III — Realized Gain, Recognized Gain, and Basis
The calculation engine:
- Lines 12–14: Only if you gave up non-like-kind property
- Line 15: Cash received + FMV of other property + net liabilities assumed
- Line 16: FMV of like-kind property received
- Line 17: Total amount realized (lines 15 + 16)
- Line 18: Adjusted basis of property given up + amounts paid
- Line 19: Realized gain or loss
- Line 20: Smaller of line 19 or line 15
- Line 21: Ordinary income under recapture rules
- Line 22: Subtract line 21 from line 20
- Line 23: Recognized gain (taxable now)
- Line 24: Deferred gain or loss
- Line 25: Basis of like-kind property received
Part IV — Conflict-of-Interest Sales
Used only by certain federal executive and judicial officers. Most filers ignore this.
Don’t Forget Form 4797
If depreciation recapture applies, you’ll also need Form 4797 (Sales of Business Property). The 2025 Form 8824 now includes dedicated e-filing lines (12a, 15a, and 25a–25c) so that filers no longer need to attach a separate statement for those details a practical improvement for anyone filing electronically.
1031 Exchange Tax Benefits: Real Numbers
Scenario: Investor sells a rental for $800,000. Original cost: $400,000. Depreciation claimed: $100,000. Adjusted basis: $300,000. Total realized gain: $500,000.
| Without 1031 | With 1031 | |
| Federal capital gains (20%) | $80,000 | $0 |
| Depreciation recapture (25%) | $25,000 | $0 |
| NIIT (3.8%) | $19,000 | $0 |
| State tax (~6%) | $30,000 | $0 |
| Total tax due now | ~$154,000 | $0 |
The full $800,000 rolls into the next property. Repeat across decades, swap until you drop and your heirs receive a stepped-up basis at death, potentially eliminating the deferred tax entirely.
Common 1031 Exchange Mistakes to Avoid
- Missing the 45-day or 180-day deadlines: No extensions for weekends or holidays.
- Touching the proceeds: Even briefly = instant disqualification.
- Using a disqualified person as QI: Related parties and agents of the taxpayer (including your CPA, attorney, or agent) cannot serve as QI.
- Filing Form 8824 with the wrong taxpayer: LLC vs. individual mistakes are common.
- Skipping Form 8824 when no gain is recognized: Required for every exchange.
- Misreporting boot: Cash, debt reduction, and security deposits to buyer all count.
- Vague property descriptions: Use street addresses and legal descriptions.
- Wrong adjusted basis: Subtract depreciation; don’t use original purchase price.
- Trying to exchange a flip or primary residence: Both are disqualified.
- Hiring the wrong QI: Look for bonded/insured firms with segregated client accounts and clear fees; avoid commingled accounts or unclear fee structures.
2026 Updates and Recent Changes
Real-property limit continues. Since 2018, only real property qualifies, personal property exchanges remain disqualified.
Section 1031 remains intact. Despite periodic legislative threats to cap the deduction, no such limits passed. As of 2026, full deferral remains available with no dollar cap.
OBBBA (2025) impact. The One Big Beautiful Bill Act didn’t change Section 1031 itself but added new IRC Section 1062 for certain qualified farmland gain deferrals, effective for tax years beginning after July 4, 2025. The 2025 Form 8824 instructions were updated to reflect this provision. Additionally, the 2025 instructions confirm that e-filers no longer need to attach separate statements for lines 12a, 15a, and 25a–25c those details are now entered directly on the e-filed form.
SBA Form 1031: Portfolio Financing Report
If you’re an SBIC licensee, here’s the actual SBA Form 1031:
What it is: A reporting form for Small Business Investment Companies to report financings to portfolio companies.
Who files it: Only licensed SBICs.
What it collects: Investment amount, terms, type, and use of funds for each portfolio company financing.
Where to download: Available at sba.gov.
This form has nothing to do with 1031 exchanges or real estate; it just shares the number “1031.”
Form 1031 vs. Form 8824: Quick Comparison
| Feature | “Form 1031” | Form 8824 |
| Issued by | Doesn’t exist as IRS form | IRS |
| Used for | N/A — common misnomer | Reporting like-kind exchanges under §1031 |
| Closest real form | SBA Form 1031 (different purpose entirely) | This is the actual 1031 exchange filing form |
| When to file | N/A | With your annual tax return |
| Who files | N/A | Anyone completing a real property like-kind exchange |
Final Thoughts
If you remember nothing else: “Form 1031” doesn’t exist — you actually need IRS Form 8824. Whether you call it a 1031 exchange, like-kind exchange, or Starker exchange, the rules are strict, the deadlines unforgiving, and the tax savings can be enormous.
Three things to act on:
File Form 8824 for any like-kind real estate exchange
- Hire your QI before you list: once the relinquished property closes, the 45-day clock starts and a missed structure can’t be fixed
- Get a CPA experienced with 1031: Form 8824 basis calculations and Form 4797 depreciation recapture aren’t DIY territory
- Done right, a 1031 exchange isn’t a tax dodge: it’s one of the most powerful long-term wealth-building tools in the entire US tax code.
Frequently Asked Questions
Is there a tax form called “Form 1031”?
No. “1031” refers to Section 1031 of the Internal Revenue Code, not a form number. The actual IRS form is Form 8824 (Like-Kind Exchanges).
What IRS form do I file for a 1031 exchange?
IRS Form 8824, filed with your tax return for the year of the exchange — even if no gain is recognized.
Can I do a 1031 exchange on my primary residence?
No. Primary residences and second homes don’t qualify. For your primary home, use the Section 121 exclusion ($250K single / $500K married filing jointly).
How long do I have to complete a 1031 exchange?
45 days to identify replacement properties in writing, and 180 days total to close — or your tax filing deadline (including extensions), whichever is earlier.
What happens if I miss the 45-day deadline?
The exchange fails and the entire gain becomes taxable in the year of the original sale. No extensions except in federally declared disasters.
Can I exchange one property for multiple?
Yes. You can sell one and buy several, or sell several and buy one. The 45-day identification rules still apply.
Do I have to use a qualified intermediary?
Yes, for any non-simultaneous exchange. You cannot take constructive receipt of the proceeds at any point.
Can I do a 1031 exchange between family members?
Yes, but related-party rules apply. Both parties must hold the property for at least 2 years after the exchange or the deferred gain becomes immediately taxable.
What is “boot” in a 1031 exchange?
Any value you receive that isn’t like-kind property, cash, debt reduction, personal property, or services. Boot is taxable up to the amount of realized gain.
Are 1031 exchanges still allowed in 2026?
Yes. Section 1031 remains fully intact with no dollar cap on deferred gains.
This article is for general educational purposes and does not constitute legal, tax, or financial advice. Always consult a qualified CPA, tax attorney, and licensed Qualified Intermediary before initiating an exchange.
Sources: IRS Form 8824 and Instructions (2025), IRC Section 1031, IRS Publication 544, U.S. Small Business Administration (Form 1031 Portfolio Financing Report), One Big Beautiful Bill Act (Public Law 119-21).
