As of November 2026, the 1031 exchange rules are the same as they were before the 2025 tax law. The official U.S. Code, updated through a law signed October 15, 2026, lists 2017 as the last time Congress amended Section 1031.
The law signed on July 4, 2025 (Public Law 119-21) changed plenty around it. The IRS has called it both the One, Big, Beautiful Bill and the Working Families Tax Cuts.
What the 2025 law did and didn't change
It didn't touch Section 1031. The deadlines, identification rules, like-kind standard, and treatment of boot all read as they did. Here's what changed nearby.
- Bonus depreciation. The 100% first-year deduction is permanent for qualified property acquired and placed in service after January 19, 2025. Notice 2026-11 is interim guidance, so details can shift. It covers shorter-lived parts of a rental, not the 27.5-year building.
- Estate tax exclusion. The basic exclusion is $15 million per person for 2026. If your plan is to keep exchanging and leave your heirs a stepped-up basis, which our post on depreciation recapture explains, check that plan with an estate attorney.
- Opportunity Zones. The program is now permanent, with zones redesignated every ten years, and new zones take effect January 1, 2027. The date you invest decides which rules apply. Gain deferred through a fund investment made before 2027 is taxed on December 31, 2026, so for a calendar-year taxpayer a 2026 investment doesn't push the gain past your 2026 return. For money invested after December 31, 2026, the new rules defer the gain until you sell the investment or five years pass, whichever comes first. Talk to your CPA before you pick it over an exchange.
Bonus depreciation on replacement property
Used property can qualify for bonus depreciation, but Treasury regulations don't let basis carried over from the property you gave up count toward it. The regulation's own example splits a trade in two: the carryover basis doesn't qualify, and the cash paid does.
So if you buy a used rental with exchange money plus new cash, only the added amount can be eligible, and only for qualifying components. Your CPA confirms the split, including how new debt is treated. Our post on bonus depreciation in 2026 covers which parts of a rental qualify and the passive loss catch.
The rules as they stand today
| Rule | What it says | Source |
|---|---|---|
| Real property only | For exchanges completed after 2017, only real property qualifies, not equipment, vehicles, or other personal property | 2017 amendment to Section 1031(a) |
| Like-kind | U.S. real property is generally like-kind to other U.S. real property, improved or unimproved, but not to property outside the U.S. | Section 1031(h), IRS |
| Purpose | Both properties held for business or investment, not primarily for sale | Section 1031(a) |
| Identify | Within 45 days of transferring the property you sold | Section 1031(a)(3) |
| Close | By the earlier of 180 days or your return's due date, including extensions | Section 1031(a)(3) |
| Related parties | Either side selling within two years can undo the deferral, and buying replacement property from a related party who is paid cash or other non-like-kind property for it generally doesn't qualify | Section 1031(f), Form 8824 instructions |
Treasury regulations that define real property for an exchange apply to exchanges after December 2, 2020.
Identification, in brief. You can name up to three properties of any value, or any number whose total fair market value at the end of day 45 is no more than 200% of the value of what you sold. Go past both limits and the identification generally fails unless you buy at least 95% of the value you identified. The list has to be in writing, signed by you, describe each property clearly, and reach by day 45 either the person required to transfer the replacement property to you, such as the seller, or another party to the exchange, such as your qualified intermediary (QI). Sending it only to a disqualified person doesn't count, unless that person is the one required to transfer the replacement property to you. Disqualified people include close family and anyone who acted as your agent in the past two years, such as your attorney, accountant, real estate agent, or employee, apart from work on the exchange itself and routine title, escrow, or banking services.
Qualified intermediary. If you receive the sale money, or it's made available to you, before you get the replacement property, it's treated as cash you received, and receiving all of it turns the exchange into a sale. Of the regulations' safe harbors, the QI is the one built for a delayed exchange. It holds the funds under an agreement that bars you from receiving, pledging, or borrowing against them until the exchange period ends, with narrow exceptions, and it can't be a disqualified person. Lineage works with QIs, who hold and disburse the funds while Lineage handles the purchase. See qualified intermediaries in a 1031 exchange.
Related parties. Related parties include your spouse, children, grandchildren, parents, grandparents, and siblings, plus certain entities tied to you. Two rules apply. If you exchange with a related person and either of you sells the property within two years, the deferral generally unwinds. And if you sell to a stranger but buy your replacement property from a related person who takes cash or other non-like-kind property for it, even through a QI, the IRS instructions say to report the property you gave up as a plain sale, because an exchange built to get around the related-party rules isn't a like-kind exchange. Both rules have the same exceptions: a death, an involuntary conversion, or a deal without tax avoidance as a principal purpose. Talk to your CPA before you buy from family or a company you control.
Disaster relief. The IRS can postpone the 45- and 180-day deadlines for taxpayers affected by a federally declared disaster. Check the IRS relief notice for your disaster to see whether it covers your exchange.
Boot, the cash or debt relief that makes part of an exchange taxable, works as it always has. See 1031 exchange boot for worked examples.
To see what the 45-day window looks like with real properties, talk to a 1031 consultant.
What's proposed or debated
The Treasury's fiscal 2025 budget proposals, released under the previous administration, included one titled "Repeal deferral of gain from like-kind exchanges." Congress didn't enact it, and the 2025 law left Section 1031 alone.
We aren't citing a bill pending now, because we couldn't confirm one from an official source as of this writing. A future law could rewrite the rules and set its own effective date, so the date you sell matters more than the date you read this.
What this means if you're selling in 2026
The playbook is the same as it's been since the 2017 law and the 2020 regulations that define real property. Engage your QI before your sale closes, line up replacement properties early so day 45 isn't a scramble, and size the replacement loan to cover the debt you're paying off. Our 1031 exchange timeline lays out the 180 days. What's new is the depreciation plan for the property you buy, since part of the cash you add may qualify for 100% bonus depreciation in the first year.
Lineage does not give tax or legal advice. This article describes federal rules as of November 2026, and rules can change. Your CPA and qualified intermediary confirm how they apply to your exchange.
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Frequently asked questions
No. Public Law 119-21 didn't amend Section 1031. The official U.S. Code shows 2017 as its last amendment.
Not under current law. The Treasury's fiscal 2025 budget proposed limiting them, and it wasn't enacted. A new law could still change the rules.
Generally not if the relative is paid cash or other non-like-kind property for it, even through a QI, unless an exception applies. Your CPA confirms.
On qualifying components, yes, but only on the basis above what carried over from the property you sold. Your CPA confirms the amount.