The Quick Version
- The clock starts the day your rental closes. Name replacements within 45 days, take title within 180.
- Hire a qualified intermediary before that closing, under an agreement barring you from drawing on the funds. Proceeds you take are taxable boot.
- Your shortlist is capped: three properties at any price, or any number totaling 200% of what you sold.
- Leftover cash and unreplaced debt get taxed this year.
- Georgia charges $1.00 on the first $1,000 of price and 10 cents per $100 after.
Last updated July 2026.
A 1031 exchange runs on a calendar, not on good intentions. Closing day starts two clocks: 45 days to identify what you are buying, 180 days to own it. Blow either deadline and the entire transaction reverts to an ordinary taxable sale.
Most trades I watch collapse do so during week one, before anyone has toured a single replacement cabin, because paperwork that should have existed by closing simply did not.
How does a 1031 exchange work when you sell a rental?
Four moves, in a fixed order. Hire a qualified intermediary, then sell with that firm holding the money. Identify replacements in writing inside 45 days, and close inside 180. Section 1031 subsequently pushes your gain forward into the new property’s basis rather than forgiving it.
The Tax Cuts and Jobs Act narrowed the field. Since 2018 the provision covers real property alone, per the IRS guidance for real estate. Furniture, equipment, and the hot tub on your deck all sit outside it.
None of that settles whether your cabin even qualifies. Eligibility is a separate test, and I worked through it for booked rentals in the vacation-rental rules for cabin owners.
Why hire the intermediary before closing?
Because the safe harbor rests on paperwork signed beforehand. Treasury protects the arrangement only where the intermediary enters a written agreement, then acquires and conveys both sides. That agreement must also expressly limit your right to receive, pledge, borrow against, or otherwise benefit from the money being held.
Draw some of those proceeds anyway and you have not killed the trade, you have manufactured taxable boot. Take the entire consideration and it stops being an exchange at all. Neither outcome is repairable on Monday.
I’m Thomas Echea, and I own homes in Blue Ridge and Fort Lauderdale. When a seller mentions a swap is “probably” happening, my first call goes to the closing attorney, never to a lender.
What are the 45-day and 180-day deadlines?
Both start when your old property transfers, and neither pauses. Identification ends at midnight on day 45. The purchase window ends at midnight on day 180, or on your return’s due date including extensions, whichever lands first, under Treas. Reg. § 1.1031(k)-1.
That second clause ambushes autumn sellers. A November transfer runs out of road at the April filing deadline unless somebody files an extension first. Raise it in December, not March.
| Day | Requirement |
|---|---|
| Before day 0 | Written agreement signed with your intermediary |
| Day 0 | Rental closes; proceeds route to that firm, never to you |
| Day 45, midnight | Shortlist signed and delivered |
| Day 180, midnight | Replacement received, or your return’s due date if sooner |
How many replacements can you name in the North Georgia mountains?
Three, priced however you like, or alternatively more than three provided their combined value stays inside 200% of what you sold. Those are the regulation’s 3-property rule and 200-percent rule, and you commit to one or the other.
Overshoot both limits and a single escape hatch remains: actually acquire at least 95% of everything identified. That target is punishing, and it certainly is not a strategy.
| Rental sold for | 3-property route | 200% route |
|---|---|---|
| $850,000 | Any three, any price | Unlimited count, $1,700,000 ceiling |
| $1,200,000 | Any three, any price | Unlimited count, $2,400,000 ceiling |
Your shortlist must be written, signed, and delivered to the intermediary or the counterparty. Around here that usually reads: a cabin in Mineral Bluff, a second in Morganton, plus a backup you would rather not own. That backup is what rescues the trade.
What happens when cash is left over?
You owe tax on it this year. Receive anything besides like-kind realty, the IRS says, and you recognize gain up to the value of that money or other property. Practitioners call the remainder boot.
Mortgage debt behaves identically. Retire a $300,000 mortgage, borrow only $220,000 on the next property, and that $80,000 of relief counts exactly as though somebody handed you the difference at the table.
So the working rule stays blunt: purchase equal or higher, borrow equal or more, or budget a check to the Treasury covering whatever gap you leave behind.
What does Georgia charge at the closing table?
Less than sellers expect, and it applies whether or not a swap is involved. Georgia’s transfer tax is $1.00 on the first $1,000 of consideration, then 10 cents per additional $100, under O.C.G.A. § 48-6-1.
An $850,000 Blue Ridge sale therefore carries $850.00, collected by the Clerk of Superior Court in Fannin County when your deed gets recorded. Against a six-figure deferred gain it barely registers, which is precisely why nobody remembers it until the settlement statement arrives.
Georgia withholds separately from sellers living out of state, and that rule tangles with exchanges. I laid out the withholding math in the piece on swapping a primary residence.
How do you report it?
Through Form 8824, filed with the return covering the year your rental transferred. Part III handles the arithmetic: gain realized, gain recognized now because of boot, and basis carried into the replacement.
Carryover basis is the piece sellers consistently underestimate. Deferral postpones taxation; it never eliminates it. Depreciation afterward splits in two: your inherited basis keeps running on the relinquished property’s original schedule, while the extra money spent trading up starts a fresh 27.5-year clock. Electing out puts everything on one new schedule instead.
None of this is tax advice, and your basis, debt, and filing calendar each move the answer. Bring a credentialed CPA and an intermediary aboard before you sign a listing agreement. Where trades fit a longer horizon sits in building a Blue Ridge real estate portfolio.
Frequently asked questions
How do you do a Section 1031 exchange?
Sign with a qualified intermediary before you close. Sell the rental, letting that firm hold every dollar. Name replacements in writing inside 45 days and take title inside 180. File Form 8824 with the return covering the year you transferred the old property.
What are the core 1031 exchange rules?
Both sides must be real property held for business or investment. Proceeds cannot reach you. Your shortlist is due by midnight on day 45, and the purchase must close by midnight on day 180 or your return’s due date with extensions, whichever arrives first.
How many properties can you identify in a 1031 exchange?
Three, regardless of their values, or any quantity whose combined fair market value stays at or under 200% of what you relinquished. Break both ceilings and your list survives only if you actually acquire 95% or more of the total value you named.
Can you do a 1031 exchange from one state to another?
Yes. All United States realty counts as like-kind to other United States realty, so a Georgia rental can roll into Florida, Hawaii, or anywhere between. Federal deadlines never change. State filing duties and withholding on each side absolutely do.
What is boot in a 1031 exchange?
Anything received that is not like-kind realty, chiefly cash and debt relief. The IRS makes you recognize gain up to the value of whatever else you took. Buying higher and replacing every dollar of retired debt keeps boot at zero.
What does Georgia’s real estate transfer tax cost?
One dollar on the first $1,000 of consideration, then 10 cents per additional $100, under O.C.G.A. § 48-6-1. An $850,000 sale runs $850.00, paid to the Clerk of Superior Court at recording. Swaps carry the same charge as ordinary sales.
