Last updated: November 10, 2026
Short answer: A 1031 exchange lets you sell a rental or other investment real estate in Avondale, AZ and put off paying tax on the gain by buying replacement investment real estate. The IRS says you must identify the replacement within 45 days and receive it within 180 days, or by your tax return due date if that's earlier.
Key takeaways
- Since 2018, a 1031 exchange covers real property held for business or investment only.
- A home used only as your personal residence doesn't qualify, but a separate main-home exclusion may help.
- Two hard deadlines: 45 days to identify in writing, 180 days to receive the new property.
- The tax is deferred, not forgiven, and you report the exchange on Form 8824.
Want to talk it through? Book a time to chat with me (30 minutes, 9 AM–7 PM Arizona time).
¡Qué tal! I'm Rosie Armenta. If you own a rental house in the West Valley and you're thinking about selling it to buy a different investment property, a 1031 exchange is a question to ask early. The rules are strict and the deadlines don't bend. Here's what the IRS says, in plain words, so you can have a better conversation with your CPA.
What is a 1031 exchange?
It's a like-kind exchange under section 1031 of the tax code. According to the IRS Instructions for Form 8824 (2025 version, checked November 10, 2026), when you exchange business or investment real property only for like-kind business or investment real property, generally no gain or loss is recognized at that time. If you also receive cash or other property, gain is recognized up to the value of that cash or other property.
IRS Publication 544 says the basis of the property you receive is generally the same as the basis of the property you gave up. That's how the gain is carried forward instead of disappearing.
Does my Avondale rental qualify?
It may, if you held it for business or investment. The IRS says that for 2018 and later, section 1031 applies only to real property held for use in a trade or business or for investment, not real property held primarily for sale. It also says real property in the U.S. and real property outside the U.S. are not like-kind to each other.
Here's what the IRS instructions say about homes:
| Property | Can it be part of a 1031 exchange? |
|---|---|
| A rental home held for investment | It may qualify |
| A home used only as your personal residence | No |
| A home that was part home, part rental | The IRS has you split it into two parts |
| Real property outside the U.S. | Not like-kind to U.S. real property |
If you're still deciding whether to sell at all, my post on whether to sell or rent out your house in Avondale, AZ walks through that choice.
What are the 45-day and 180-day deadlines?
For a deferred exchange, the IRS instructions say:
- Identify the replacement property within 45 days after you transfer the property you're giving up. It has to be in writing and clearly described, like a street address or legal description.
- Receive the replacement property within 180 days, or by the due date of your tax return (including extensions) for that year, whichever comes first.
Example only: made-up round numbers, not real Avondale prices. The dates are made up too.
| Example only | Made-up date |
|---|---|
| Rental sale closes ($400,000 sale) | March 1 |
| Day 45: written identification deadline | April 15 |
| Day 180: deadline to receive the new property | August 28 |
In this made-up example, the 180-day deadline comes before the next year's tax return due date, so it's the one that counts. Your CPA and exchange professional should confirm your real dates.
Who holds the money during the exchange?
The IRS instructions describe using a qualified intermediary (QI). Related parties and your agents can't be your QI. IRS Publication 544 says that includes someone who acted as your employee, attorney, accountant, investment banker or broker, or real estate agent or broker within the two years before the transfer, with some exceptions. That means I can't be your QI. A 2008 IRS fact sheet also warns that taking control of the cash before the exchange is done may disqualify the whole exchange.
What about the home I live in?
The IRS says section 1031 doesn't apply if the property you gave up was used only as your personal residence. If you owned it and used it as your main home for at least 2 of the 5 years before the sale or exchange, the section 121 exclusion may let you exclude part or all of the gain. My post on taxes when you sell your house in Avondale, AZ explains that exclusion.
How do I report a 1031 exchange?
You report it on IRS Form 8824, Like-Kind Exchanges, with your tax return for the year of the exchange. The IRS instructions say that after an exchange with a related party, you also file Form 8824 for the 2 years after the exchange.
How do I start a 1031 exchange, step by step?
- Talk with your CPA or tax professional before you list the rental.
- Line up a qualified intermediary before the sale closes, so you don't touch the sale money.
- List and sell the rental, and note the closing date. Your 45-day and 180-day clocks start there.
- Identify your replacement property in writing within 45 days.
- Close on the replacement property within 180 days, or by your return due date if that's earlier.
- Report the exchange on Form 8824 with that year's tax return.
If you're selling from outside the U.S., my post on FIRPTA withholding when selling a home in Avondale, AZ covers a separate tax rule that may also apply.
Save this timeline before you list a rental, and share it with a family member who owns investment property.
Thinking about selling a rental home? Book a time to chat with me (30 minutes, 9 AM–7 PM Arizona time), or call or text me at 623-295-5770.
Frequently Asked Questions
What is a 1031 exchange in simple words?
It's a way to sell business or investment real estate and buy like-kind real estate while putting off tax on the gain. The tax is deferred, not forgiven.
Can I do a 1031 exchange on my primary home?
No. The IRS says section 1031 doesn't apply to property used only as your personal residence. A separate main-home exclusion may apply instead.
What is the 45-day rule?
You have 45 days after transferring the property you gave up to identify the replacement property in writing.
What is the 180-day rule?
You must receive the replacement property within 180 days, or by your tax return due date with extensions, whichever is earlier.
Can my real estate agent hold the money?
No. IRS Publication 544 says someone who acted as your real estate agent or broker within the prior two years is generally a disqualified person.
Do I have to buy another house?
Not necessarily. The IRS says real properties are generally like-kind whether they're improved or unimproved, but both must be held for business or investment.
What happens if I get some cash back?
The IRS says gain is recognized up to the cash or other non-like-kind property you receive.
What form do I file for a 1031 exchange?
IRS Form 8824, Like-Kind Exchanges, with your tax return for the year of the exchange.
I'm a real estate agent, not a CPA, a tax attorney or a qualified intermediary. I can't tell you whether your sale qualifies for a 1031 exchange or how much tax you would defer. Please talk with a tax professional before you list the property.
This article is general information, not legal, tax, or financial advice. Please talk with a licensed attorney, CPA, or lender about your situation.
About the author
Rosie Armenta | West USA Realty. Avondale (85392) is her home base, and she helps buyers and sellers across the West Valley in English and Spanish. Book a time to chat with me (30 minutes), or call or text 623-295-5770. Selling? Get a home value report.
Rosie Armenta | West USA Realty | Equal Housing Opportunity
Information was checked on November 10, 2026, from the IRS Instructions for Form 8824 (2025), IRS Publication 544 (2025) and IRS Fact Sheet FS-2008-18. Tax rules can change, so please confirm current details with a CPA or tax professional.