Can I exchange into a different type of property?

Yes. Real estate held for investment or business use is like-kind to other such real estate, so a rental house can be exchanged for land, a commercial building or several smaller rentals.

Can I use a 1031 exchange on a house I flipped?

Generally not. Property held mainly for resale is treated as inventory rather than investment property. How long and for what purpose you held it matters, which is a question for your tax adviser.

Does Florida tax the gain if I do not exchange?

Florida has no personal state income tax, so an individual owes federal tax on the gain. Corporations are treated differently. Your tax adviser confirms what applies to you.

How a 1031 Exchange Works in Florida

Reviewed by Tyson E. Sam, Founder and Broker of Record, BreakThru Realty, Florida License 3565210

Published October 4, 2026

The Short Answer

A 1031 exchange lets you defer federal capital gains tax when you sell investment real estate and buy other investment real estate with the proceeds. You must identify the replacement property within 45 days of closing the sale and close on it within 180 days, and a qualified intermediary has to hold the money in between. The rules are strict and the deadlines do not move, so set it up with a tax adviser and an intermediary before the sale closes.

What Qualifies

Real property held for investment or for use in a business, exchanged for other real property held the same way. A rental house can be exchanged for land, a retail building, an apartment building or another rental; the properties need not be the same type. Your own home does not qualify, and neither does property held mainly for resale, which is how the tax code usually sees a quick flip. Both properties must be in the United States.

The Two Deadlines

From the day the sale of the old property closes, you have 45 days to identify possible replacement properties in writing, and 180 days, or until your tax return is due if that comes first, to close on one or more of them. The periods run together, count calendar days and are not extended for weekends or holidays.

The Qualified Intermediary

You cannot receive the sale proceeds, even for a day. A qualified intermediary, an independent company engaged before the sale closes, holds the funds and passes them to the closing of the replacement property. Your own attorney, accountant or real estate agent generally cannot serve in that role. The exchange agreement has to be signed before the first closing.

Identifying Replacement Properties

Most investors use the three-property rule: name up to three properties of any value and buy one or more of them. Alternatively you can name more than three as long as their combined value is no more than twice the value of the property you sold. Identify realistic properties, ideally ones you have already inspected, because the list cannot be changed after day 45.

Deferring All of the Gain

To defer the whole gain, buy property worth at least as much as the one you sold, reinvest all of the net proceeds, and replace any debt you paid off with new debt or added cash. Cash you take out, or debt you do not replace, is called boot and is taxed. The tax is deferred, not forgiven: it carries into the new property.

Where a Broker Fits

The sale contract and the purchase contract should each say an exchange is intended and that the other party will cooperate at no cost to them. Timing matters more than usual: many investors start the search before the old property closes, so the 45 days are spent confirming a choice rather than finding one. BreakThru coordinates both sides with your intermediary and your adviser.

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Every property is its own set of numbers. Send us the address or the strategy and a BreakThru broker will go through the rents, the costs and the rules that apply to it. Request an investor strategy call · South Florida Investor Market Index