What qualifies as like-kind for a Texas 1031 exchange?

For real estate, like-kind is broad: almost any U.S. real property held for investment or productive use in a business can be exchanged for almost any other. Raw land can be exchanged for an industrial building, a retail strip for an apartment complex, or a single property for several. It must be real property (since 2018, personal property no longer qualifies), held for investment or business — not a primary residence or property held mainly to flip — and both legs must be held by the same taxpayer.

What are the deadlines for a 1031 exchange?

Two hard clocks start the day your relinquished property closes and run at the same time: 45 calendar days to identify replacement property in writing, and 180 calendar days to close on it. They include weekends and holidays and are not extended for ordinary delays. Miss the 45-day identification and the exchange fails entirely — no grace period. Federally declared disasters can trigger automatic extensions for affected areas.

FAQ · June 23, 2026 · Steven Owen

How does a 1031 exchange work for Texas commercial property?

Q: How does a 1031 exchange work for Texas commercial property?

You sell investment or business real estate, have a qualified intermediary hold the proceeds (you can never touch them), identify replacement property in writing within 45 days of closing, and close on the replacement within 180 days. Do that — reinvesting equal or greater value and debt into like-kind real estate held for investment — and you defer the federal capital gains tax and depreciation recapture you would otherwise owe. The rules are unchanged for 2026.

A 1031 exchange lets you sell investment or business real estate and defer the federal capital-gains tax and depreciation recapture — as long as you reinvest the proceeds into like-kind real estate through a qualified intermediary, on a strict timeline. Two clocks start the day your sale closes: 45 days to identify the replacement property in writing, and 180 days to close on it. Reinvest equal or greater value and debt into like-kind property held for investment, never touch the cash yourself, and the tax bill is deferred — potentially indefinitely. The rules are unchanged for 2026: recent federal tax legislation preserved Section 1031 in full, without the deferral cap that had been proposed.

How a 1031 exchange actually works, step by step

Engage a qualified intermediary (QI) before you close. The QI holds your sale proceeds. If the money touches your hands or bank account, the exchange is dead — this is the most common fatal error, and it has to be set up before the relinquished sale closes.
Sell the relinquished property. Your closing date starts both clocks.
Identify replacement property within 45 days. In writing, signed, delivered to the QI. The 45 days include weekends and holidays.
Close on the replacement within 180 days. From the relinquished closing date — not from the end of the 45-day window.
Match value and debt. To defer 100% of the tax, buy equal or greater value and replace the debt you paid off. Any shortfall (“boot”) is taxable.

The two deadlines, in plain terms

1031 exchange timeline (IRS Section 1031, current for 2026)
Clock	Length	What it means
Identification period	45 calendar days	Identify replacement property in writing to your QI. No extensions for weekends, holidays, or ordinary delays.
Exchange period	180 calendar days	Close on the replacement. Runs concurrently with (not after) the 45 days.

Both clocks start on the day the relinquished property closes, and they run at the same time — so if you use all 45 days to identify, you have 135 left to close. Miss the 45-day mark and the exchange fails completely: no grace period, no partial credit. (Federally declared disasters, which have been frequent in Texas, can trigger automatic 45/180 extensions for affected areas.)

What counts as “like-kind”

For real estate, like-kind is far broader than most owners expect. Almost any U.S. real property held for investment or business use can be exchanged for almost any other: raw land for an industrial building, a retail strip for an apartment complex, one property for several, or several for one. What matters is intent and type, not asset class. The guardrails:

It must be real property. Since the 2017 tax law, personal property (equipment, vehicles, etc.) no longer qualifies.
Both the sold and purchased property must be held for investment or productive business use — not your home, and not inventory you bought mainly to flip.
The same taxpayer who sold must buy — the entity on title has to match.
Both properties must be in the United States (U.S. for U.S.; foreign property is its own separate like-kind class).

The identification rules most people get wrong

Within the 45 days you must identify replacements under one of three rules:

Three-property rule: identify up to three properties, any value — the option most exchangers use.
200% rule: identify more than three, as long as their combined value is no more than 200% of what you sold.
95% rule: identify any number at any value, but you must close on at least 95% of the total identified value.

What’s different about a 1031 in Texas

Texas has no state income tax, so a 1031 here defers federal tax — long-term capital gains (typically 15–20%), the 3.8% net investment income tax where it applies, and depreciation recapture taxed up to 25%. That recapture is the piece owners forget: even if a property barely appreciated, years of depreciation deductions can create a real tax bill at sale that a 1031 defers. Texas is also one of the most active 1031 markets in the country — population and job growth keep replacement demand high, which means quality replacement property moves fast and the 45-day clock is the real constraint. The discipline is lining up your replacement target before you sell, not after.

How exchanges quietly fail

Touching the money. No QI in place, or proceeds routed through you — instant disqualification.
Missing the 45-day identification. The single most common failure; there is no extension.
Not enough replacement inventory. Identifying in a hot market without a real shortlist, then running out of clock.
Taking boot. Buying down in value or pulling cash out — the difference is taxable.
Title mismatch. Selling in one entity and trying to buy in another.

How SCORE helps you exchange

Steven Owen runs 1031s the way an engineer with an NYU Stern finance MBA would — backward from the deadline. Before you list the relinquished property, SCORE works the replacement side first: we source on- and off-market Texas targets through our buy-box matching engine and a 1,700+ developer and investor network, so your 45-day identification list is real, not hopeful. We coordinate with your qualified intermediary, CPA, and attorney — we don’t replace them — and underwrite each replacement on credit, term, and basis so the asset you exchange into is one you actually want to own.

Planning a 1031 in Texas?

Start the replacement search before you sell. Tell us what you’re trading out of and what you want to own next.

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Current as of June 2026; Section 1031 was preserved in full by recent federal tax legislation. This is general information, not tax or legal advice — 1031 exchanges have strict requirements and real consequences if done wrong, so work with a qualified intermediary and your own CPA and attorney. Related: 1031 Exchange · Retail / NNN · NNN retail cap rates in Texas.