1031 Exchanges in Florida: A Guide for Miami Investors

A 1031 exchange lets you sell a rental or other investment property and put off paying federal capital gains tax, including depreciation recapture, by reinvesting the proceeds in another investment property. To qualify, a qualified intermediary must hold the money, you must identify the replacement property within 45 days and you must close within 180 days. It defers the tax; it does not erase it, and your own home and your flips don't qualify.

What qualifies for a 1031 exchange

Since 2018, Section 1031 applies only to real estate. Both the property you sell (the "relinquished" property) and the one you buy (the "replacement") must be held for investment or for use in a business. "Like-kind" is broad: a duplex in Hialeah can be exchanged for vacant land, a warehouse, a strip center or several single-family rentals.

• Qualifies: long-term rentals, commercial buildings, land held for investment, and multifamily properties.
• Does not qualify: your primary residence, a second home you use personally, and property held mainly for resale, such as a flip you renovate to sell.
• U.S. only: property in the United States is not like-kind to property abroad.
• Vacation rentals in the Keys: under IRS Revenue Procedure 2008-16, a dwelling can count as investment property if, for each of the two years around the exchange, you rented it at fair rent for at least 14 days and your personal use did not exceed the greater of 14 days or 10% of the rented days.

The 45-day and 180-day deadlines

The clock starts the day the relinquished property closes, and the IRS does not grant extensions except in federally declared disasters.

1. Before closing: sign an exchange agreement with a qualified intermediary (QI) so the sale proceeds go straight to the QI, never to you.
2. Day 45: deliver a signed, written list of the replacement properties to the QI. Most investors use the three-property rule (up to three properties of any value) or the 200% rule (any number, as long as their total value is no more than twice what you sold).
3. Day 180: close on the replacement property. The deadline is day 180 or the due date of your tax return for that year, whichever comes first, so a sale late in the year may require filing a tax extension.
4. Tax time: report the exchange on IRS Form 8824 with your return.

Florida investors should know about the disaster exception. After Hurricane Milton in 2024, IRS relief covered Miami-Dade, Broward and Monroe along with most of the state, and pushed many 45- and 180-day deadlines into 2025. Relief depends on the specific IRS announcement, so confirm with your QI and CPA rather than assuming you are covered.

The qualified intermediary

If you touch the money, even for a day, the exchange can fail and the whole gain becomes taxable. The QI holds the funds and handles the paperwork. Your Realtor, attorney, accountant or employee generally can't act as your QI if they have worked for you in that role within the past two years. Because there is no single federal license for intermediaries, ask how your funds are held, whether they are in a segregated account and what bonding or insurance the company carries. Some intermediaries have gone bankrupt in the past, so this matters.

Boot, with a Miami investor example

"Boot" is anything you receive that isn't like-kind property, such as cash you keep or debt that is paid off and not replaced. Boot is taxable up to the amount of your gain. To defer all of the tax, the general rule of thumb is:

• Buy replacement property of equal or greater value than the net sale price.
• Reinvest all of the net cash proceeds.
• Replace any mortgage you paid off with new debt or with additional cash of your own.

A Miami investor example

These numbers are a made-up example to show how an exchange works:

If the same investor bought a $700,000 replacement and kept $50,000 in cash, that $50,000 would be taxable boot. Other common Miami moves include trading one older rental for two newer homes in Homestead or Florida City, or trading a management-heavy property for land or a commercial building. If you will finance the replacement, see our guide to DSCR loans for rental property.

Florida points to keep in mind

• No state income tax: Florida does not tax the gain, so the exchange is about federal tax only.
• Closing costs still apply: doc stamps on the deed, title charges and commissions are paid on both sides of the exchange.
• Property taxes reset: the replacement property is reassessed at market value when you buy, and non-homestead properties get only a 10% cap on yearly assessment increases for non-school taxes. Budget for higher taxes and Miami insurance costs.
• Related parties: exchanges with family members or your own companies are allowed in limited cases, but if either side sells within two years the deferred tax can come due.
• Tenants: if your property is rented, leases and deposits transfer to the buyer. See selling a house with tenants in Florida.

Reverse exchanges and other options

If you find the replacement first, a "reverse exchange" lets an exchange accommodation titleholder buy and hold it for you for up to 180 days while you sell. Some investors also buy fractional interests such as Delaware Statutory Trusts to meet the deadline. And if an exchange doesn't fit, a regular sale may still make sense; compare it with our capital gains tax guide. Many investors exchange several times, and under current law heirs generally receive a stepped-up basis at death, which can eliminate the deferred gain.

How we can help

We help Miami-Dade and Broward investors line up the sale and the replacement property so the 45-day list is real, not a guess. We can pull rental comps, run the numbers on replacement properties from Homestead to Hollywood and coordinate with your QI and CPA. Call (786) 545-9222 or visit our investor page to start.

Frequently asked questions