By Start1031 Team Published July 11, 2026 Updated July 11, 2026

What Qualifies for a 1031 Exchange?

To qualify for a 1031 exchange, a property must be real property held for productive use in a trade or business or for investment, exchanged for other real property that will also be held for business or investment use (IRC §1031(a)(1)). Since the 2017 Tax Cuts and Jobs Act, personal property — equipment, vehicles, artwork — no longer qualifies. Primary residences, properties held primarily for sale (dealer inventory and flips), partnership interests, and REIT shares are all excluded, and U.S. real property is never like-kind to foreign real property.

The core test: held for investment or business use

Section 1031 asks two questions about every property in the exchange:

Is it real property? Land and anything permanently affixed to it — buildings, structures, and certain long-term interests in land such as a 30-year-or-longer leasehold (Treas. Reg. §1.1031(a)-1).
Is it held for the right purpose? Both the property you sell (the relinquished property) and the property you buy (the replacement property) must be held for productive use in a trade or business or for investment — not for personal use, and not primarily for resale.

The two qualifying purposes are interchangeable: property used in a business may be exchanged for property held for investment, and vice versa. What matters is your intent in holding the property, judged by the facts — how the property is actually used, whether it produces rental income, how you report it on your tax returns, and how long you hold it.

”Like-kind” is broad for real estate

For real property, like-kind refers to the nature or character of the property, not its grade or quality (Treas. Reg. §1.1031(a)-1(b)). In practice, nearly any U.S. real property held for investment or business use is like-kind to nearly any other. The properties do not need to be the same type, price range, or condition.

You sell (relinquished)	You buy (replacement)	Like-kind?
Raw land	Rental duplex	Yes
Single-family rental	Retail strip center	Yes
Farmland	Warehouse	Yes
Office building	Apartment complex	Yes
Rental condo	Raw land held for investment	Yes
U.S. rental property	Rental property abroad	No — IRC §1031(h)

Improved real estate is like-kind to unimproved real estate. You can exchange one property for several, or several for one — subject to the identification rules and 45/180-day deadlines covered in our 1031 exchange guide.

Post-TCJA: personal property no longer qualifies

Before 2018, Section 1031 also covered exchanges of personal property — machinery, vehicles, aircraft, franchises, even artwork. The Tax Cuts and Jobs Act limited Section 1031 to real property for exchanges completed after December 31, 2017. As the IRS puts it, “Section 1031 now applies only to exchanges of real property and not to exchanges of personal or intangible property” (IRS, Like-Kind Exchanges — Real Estate Tax Tips).

That means exchanges of machinery, equipment, vehicles, artwork, collectibles, patents, and other intangible business assets no longer qualify — full stop. Only the real-property components of a transaction are eligible for deferral.

What does NOT qualify

Excluded asset	Why it fails
Primary residence	Not held for investment or business use. Home sales are governed by the Section 121 exclusion instead — see 1031 exchanges and primary residences.
Fix-and-flips / dealer inventory	IRC §1031(a)(2) excludes “real property held primarily for sale.” A house bought to renovate and resell is inventory, not investment property.
Partnership interests	An interest in a partnership (or multi-member LLC) is personal property, not real property — even if the partnership owns only real estate. The partnership itself can exchange at the entity level.
REIT shares	Stock is not real property, so you cannot exchange a building for REIT shares. (A Delaware statutory trust interest structured under Rev. Rul. 2004-86 is the exception — the IRS treats it as a direct interest in the underlying real estate.)
Foreign property for U.S. property	”Real property located in the United States and real property located outside the United States are not property of a like kind” (IRC §1031(h)). Foreign-for-foreign exchanges can qualify; foreign-for-U.S. cannot.
Stocks, bonds, notes, other securities	Not real property, so outside the post-TCJA scope of Section 1031.

The dealer exclusion trips up more investors than any other. If your pattern of activity looks like a business of buying and selling houses — short holds, frequent sales, properties marketed for resale rather than rented — the IRS can treat the property as inventory “held primarily for sale” and deny the exchange, regardless of how the deal is papered.

Gray areas

Vacation homes: the Rev. Proc. 2008-16 safe harbor

A second home used purely for personal enjoyment does not qualify — the Tax Court in Moore v. Commissioner (T.C. Memo. 2007-134) rejected an exchange of vacation homes that were never rented, holding that the “mere hope or expectation that property may be sold at a gain cannot establish an investment intent if the taxpayer uses the property as a residence.”

But a vacation property that genuinely operates as a rental can qualify. Rev. Proc. 2008-16 gives a safe harbor under which the IRS will not challenge a dwelling unit’s status, if in each of the two 12-month periods before the exchange (for relinquished property) or after it (for replacement property):

You own the dwelling unit for at least 24 months (the qualifying use period);
You rent it to another person at a fair rental for 14 days or more; and
Your personal use does not exceed the greater of 14 days or 10% of the days it was rented at fair rental.

Failing the safe harbor doesn’t automatically disqualify a property — it just means qualification depends on the facts, without IRS protection.

Mixed-use property

Property that is partly personal and partly business can qualify in part. A duplex where you live in one unit and rent the other, or a home with a dedicated farm or business portion, is treated as two properties: the business/investment portion can be exchanged under Section 1031, while the personal-residence portion falls under Section 121. Rev. Proc. 2005-14 explains how both provisions can apply to a single property, and notes that Section 1031 does not apply to property used solely as a personal residence.

Holding-period myths

There is no fixed statutory holding period. Section 1031 does not say you must hold a property for one year, two years, or any other span before exchanging it. What the statute requires is qualifying intent — the property must be held for investment or business use, and holding time is simply one piece of evidence of that intent. A longer hold, actual rental income, and consistent tax reporting all support investment intent; a quick resale undercuts it.

Two real rules are often confused with a “holding period requirement”:

The related-party 2-year rule. Under IRC §1031(f), if you exchange with a related person and either of you disposes of the exchanged property within 2 years, the deferred gain is generally recognized at that point (with exceptions for death, involuntary conversion, and transactions without a tax-avoidance purpose). This is a post-exchange disposition rule for related-party deals — not a general holding requirement.
The vacation-home safe harbor’s 24 months. The two-year ownership and rental pattern in Rev. Proc. 2008-16 (above) is a safe harbor for dwelling units, not a statutory minimum for all exchanges.

Beyond the property: the rest of the qualification checklist

Qualifying property is necessary but not sufficient. A valid exchange also requires:

A qualified intermediary for a delayed exchange — you cannot touch the sale proceeds (Treas. Reg. §1.1031(k)-1). See our guide to 1031 exchange companies.
The 45-day identification and 180-day closing deadlines, which run concurrently from the transfer date.
Equal-or-greater value reinvestment if you want full deferral — any cash kept or debt reduction is taxable boot. Run the numbers with our 1031 exchange calculator.
Form 8824 reporting with your return for the year of the transfer (IRS Form 8824).

If you need to buy before you sell, a reverse exchange under the Rev. Proc. 2000-37 safe harbor can work — the qualification rules for the properties themselves are the same. State tax treatment also varies; check our state-by-state guides.

Frequently asked questions

Does a rental property qualify for a 1031 exchange?

Can I 1031 exchange my primary residence?

Do fix-and-flip properties qualify for a 1031 exchange?

How long do I have to hold a property before doing a 1031 exchange?

Can a vacation home qualify for a 1031 exchange?

This page is for educational purposes only and is not legal or tax advice. 1031 exchanges are governed by IRC §1031 and related Treasury Regulations; consult a qualified tax professional or attorney about your specific situation. Primary sources: IRC §1031, Treas. Reg. §1.1031(a)-1, Treas. Reg. §1.1031(k)-1, IRS Like-Kind Exchanges — Real Estate Tax Tips, Rev. Proc. 2008-16, Rev. Proc. 2005-14, Rev. Rul. 2004-86, IRC §121, IRS Form 8824.