What Is a 1031 Exchange in Florida? Deadlines, Rules, and Reporting

A 1031 exchange in Florida lets you sell one investment property and buy another without paying federal capital gains tax at the time of sale, as long as you follow the IRS rules on timing, property type, and how the money is handled. The tax is deferred, not erased. Because Florida imposes no individual income tax, the only capital gains tax you are postponing is the federal one, but that can still reach 20% of your profit, plus up to 25% depreciation recapture and a 3.8% Medicare surcharge for higher earners.¹²

Florida still charges its documentary stamp tax of $0.70 per $100 of consideration on both deeds in the exchange. That transfer tax is a closing cost and cannot be deferred.³

Which Properties Qualify

Both the property you sell (the relinquished property) and the one you buy (the replacement property) must be real property held for investment or business use.⁴ “Like-kind” is broader than it sounds. It refers to the nature of the asset, not its specific type. A single-family rental can be exchanged for an apartment building, and raw land for a commercial warehouse, and both satisfy the rule.⁵

Several categories are out. Your personal residence does not qualify, because it is not held for investment. Property held primarily for resale, such as a flip, is excluded. Since the Tax Cuts and Jobs Act took effect in 2018, equipment, vehicles, artwork, and other personal property no longer qualify at all — Section 1031 now applies only to real estate.⁵ And U.S. real property can only be exchanged for other U.S. real property; a Florida rental cannot be swapped for a condo abroad.⁴

The 45-Day and 180-Day Deadlines

Two clocks start the day you transfer the relinquished property to the buyer, and both are strict.

45-day identification period. You must identify potential replacement properties in writing by midnight on the 45th calendar day. Weekends and holidays count. There is no extension for a deadline falling on a Sunday.⁴
180-day exchange period. You must close on the replacement property by the earlier of 180 days after the transfer or the due date (including extensions) of your federal tax return for the year of the sale.⁴

The 180 days runs from the sale, not from the end of the 45-day window. So once identification closes, you have roughly 135 days left to negotiate and close. Neither deadline can be extended except in a presidentially declared disaster.⁶ If you sell near the end of the calendar year, request an extension on your federal return so the 180-day period isn’t cut short by the April filing date.

How to Identify Replacement Properties

Your written identification goes to a neutral party, usually your qualified intermediary, within the 45-day window. For real estate, a street address or legal description is specific enough. Three rules control how many properties you can name:⁷

The three-property rule. You may identify up to three replacement properties regardless of their value. This is what most investors use.
The 200% rule. You may identify more than three, but their combined fair market value cannot exceed 200% of the price of the property you sold.
The 95% rule. If you exceed both limits, the identification still works only if you actually acquire properties worth at least 95% of everything you identified.

Blowing past the first two rules without meeting the 95% threshold means the IRS treats you as having identified nothing, and the entire exchange fails.⁷ You can revoke an identification in writing any time before the 45th day, so trimming your list as deals firm up is both allowed and smart.

Why You Need a Qualified Intermediary

You cannot touch the sale proceeds. If the money passes through your hands or into an account you control, the exchange is dead. A qualified intermediary (QI) is a neutral third party who signs a written agreement with you, receives the buyer’s funds at closing on your relinquished property, holds them, and then wires them to the closing agent handling your replacement purchase.⁵

Not just anyone can serve. Treasury Regulations treat as “disqualified persons” anyone who has worked for you as an employee, attorney, accountant, investment broker, or real estate agent within the two years before the exchange. Services related specifically to 1031 exchanges, and routine title, escrow, or trust services, do not disqualify someone.⁷ So your long-time CPA cannot be your QI, but a specialized exchange company can.

The QI industry is not federally regulated, and some states impose their own insurance or licensing standards. Before you hand over six-figure proceeds, ask how the funds are held, whether the firm carries a fidelity bond, and whether it has errors-and-omissions coverage.

Reinvest Everything, or Pay Tax on the Difference

To defer the full gain, your replacement property has to be worth at least as much as the one you sold, you have to reinvest every dollar of proceeds, and you have to carry at least as much debt as you paid off (or make up the difference with your own cash). Any shortfall creates “boot,” which is taxable in the year of the sale.⁶

Boot comes in two forms. Cash boot is sale proceeds you keep instead of reinvesting; pocket $50,000 and that $50,000 is taxable. Mortgage boot is a reduction in your debt load; if the old mortgage was $300,000 and the new one is $200,000, the $100,000 of debt relief is taxable unless you add $100,000 of fresh cash to the purchase.

Partial deferral is still worthwhile. If the numbers don’t line up perfectly, you pay tax only on the boot and defer the rest. If you claimed depreciation on the old property, note that boot gets taxed first at the depreciation recapture rate (up to 25%) before any remainder is treated as capital gain.

Vacation Homes and Second Homes

Florida’s vacation market makes this a common question. A property you use purely for personal enjoyment does not qualify. The IRS does offer a safe harbor for dwelling units — houses, condos, and similar — that you both rent out and occasionally use yourself.⁸

For the property you sell, each of the two 12-month periods before the exchange has to meet both tests: rented at a fair market rate for at least 14 days, and personal use no greater than 14 days or 10% of the days it was rented, whichever is larger. The replacement dwelling has to meet the same tests in each of the two 12-month periods after the exchange, and you have to own it for at least 24 months after closing.⁸ If you eventually want to move into the replacement home, waiting out the two years while maintaining the rental activity protects the exchange.

Related-Party Exchanges

Exchanging property with a family member or an entity you control triggers an extra holding rule. Both you and the related party must hold the exchanged properties for at least two years after the exchange. If either side disposes of its property within that window, the original exchange unwinds and the deferred gain becomes taxable in the year of the early sale.⁴

There are narrow exceptions: a disposition after the death of either party, an involuntary conversion like condemnation or casualty (provided the exchange happened before the threat arose), and transactions you can show were not structured to avoid federal income tax.⁴ The IRS reviews related-party deals closely, so document the business purpose carefully.

How to Report the Exchange

You report a 1031 exchange on IRS Form 8824 (Like-Kind Exchanges), attached to your federal return for the year you transferred the relinquished property.⁹ The form asks for a description of both properties, the identification date and the date you received the replacement, your relationship to the other party if any, and the values, liabilities, and cash on each side.

To fill it out accurately, pull the legal descriptions from both deeds, calculate your adjusted basis in the relinquished property (original purchase price plus improvements minus accumulated depreciation), and keep the settlement statements from both closings.⁹ Florida has no individual income tax return, so Form 8824 with your federal return is the entire filing obligation.¹

If the Exchange Falls Apart

Miss the 45-day deadline, fail to close within 180 days, or lose the replacement deal, and the exchange collapses. The QI returns the held funds to you, and the original sale becomes a taxable one. You owe capital gains tax, depreciation recapture, and the 3.8% net investment income tax if it applies, all in the year of the original sale.

If you made a documented, good-faith effort that fell through for reasons outside your control, the installment sale method may let you spread the gain over the years you actually receive payments. That option depends on the paper trail: identification letters, inspection reports, correspondence about why the deal died. Without that record, the IRS can deny installment treatment.

Hold Until Death for a Stepped-Up Basis

The deferral strategy pays its biggest dividend at the end. If you hold the replacement property until you die, your heirs take a stepped-up basis equal to the fair market value on the date of death.¹⁰ Every dollar of gain you deferred across your lifetime — potentially through multiple successive exchanges — is wiped out for income tax purposes. Your heirs can sell at the stepped-up value and owe no capital gains tax on the previously deferred gain.

That is why Florida investors use 1031 exchanges as a long-term strategy rather than a one-off tax move. Trade up through decades of larger or higher-yielding properties, defer each time, and pass the portfolio on with a clean basis. No Florida income tax at any stage of the deferral, and a federal reset at the end.

1
Florida Department of Revenue. Does Florida Have a Capital Gains Tax?
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Office of the Law Revision Counsel. 26 USC 1411 – Imposition of Tax
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Online Sunshine. Florida Statutes 201.02 – Tax on Deeds and Other Instruments
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Office of the Law Revision Counsel. 26 USC 1031: Exchange of Real Property Held for Productive Use or Investment
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Internal Revenue Service. Like-Kind Exchanges – Real Estate Tax Tips
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Internal Revenue Service. Like-Kind Exchanges Under IRC Section 1031
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eCFR. 26 CFR 1.1031(k)-1 Treatment of Deferred Exchanges
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Internal Revenue Service. Revenue Procedure 2008-16
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Internal Revenue Service. Instructions for Form 8824 (2025)
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Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent