What Happens if you Miss a 1031 Exchange Deadline?
A 1031 exchange is a powerful tool for real estate investors. It allows you to defer paying capital gains taxes on the sale of an investment property by reinvesting the proceeds into a new property. But what happens if you miss a deadline when completing a 1031 exchange?
Key Takeaways
- Missing either the 45-day identification deadline or the 180-day closing deadline automatically disqualifies the entire 1031 exchange.
- When an exchange fails due to a missed deadline, the full deferred capital gains tax becomes immediately due for the tax year of the sale.
- There are virtually no extensions for missed 1031 exchange deadlines — only federally declared disasters may provide limited relief.
Table of contents
Two Key Deadlines
There are two key deadlines that must be met when completing a 1031 exchange:
1) The 45-Day Identification Period
2) The 180-Day Exchange Period
The 45-Day Identification Period is the first deadline. This is the period of time in which you must identify the replacement property or properties that you wish to purchase with the proceeds from your sale.
The 180-Day Exchange Period is the second deadline. This is the period of time in which you must complete the purchase of your replacement property or properties. The clock starts ticking on this deadline as soon as your original property is sold.
Make sure that you have these deadlines in mind from the start of your 1031 exchange. Our 1031 exchange deadline calculator can be helpful in this regard.
What if I Miss a 1031 Exchange Deadline?
If you miss any one of these, your 1031 exchange will not be valid and you will be required to pay capital gains taxes on the sale of your property. So, it’s important to understand each and plan accordingly. Keeping track of the deadlines is essential.
Understanding these Deadlines is Critical
As a real estate investor, it’s important to understand the deadlines associated with 1031 exchanges. Missing just one of these requirements can invalidate your exchange and result in costly capital gains taxes. So, plan ahead and work with a qualified intermediary to make sure everything goes smoothly. If you have additional questions or need help getting started, give us a call at (888) 508-1901.
Disclaimer: This content is for informational purposes only and does not constitute legal or tax advice. Consult your tax advisor or attorney for advice specific to your situation.
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