The 1031 Exchange Survived the 2025 Tax Law
If you own investment real estate, you have probably heard the warning more than once: the 1031 exchange is on the chopping block, so sell now before it disappears. That fear has driven a lot of rushed decisions over the past few years. So here is the direct answer, up front: as of 2026, the 1031 exchange is not going away. Section 1031 of the Internal Revenue Code remains fully intact for real property held for investment or business use, and the most recent federal tax law left it untouched.
This guide explains where the “1031 is ending” story came from, what the 2025 tax law actually did (and did not) change, and how to think about your own timeline without letting headlines make the decision for you.
Where the Fear Came From
The concern was not invented out of thin air. Over the past several years, more than one federal budget proposal floated limiting or eliminating like-kind exchanges. The most talked-about version would have capped the amount of gain you could defer through a 1031 exchange at $500,000 per year, with anything above that becoming taxable in the year of sale. Other proposals raised the idea of a one-exchange-per-lifetime limit.
None of those proposals became law. They were budget suggestions and negotiating positions, not enacted rules. But because they were repeated in the press year after year, many investors came to believe the change was already happening, or was inevitable.
What the 2025 Tax Law Actually Did
The One Big Beautiful Bill Act was signed into law on July 4, 2025. For real estate investors, the most important news was what the bill left alone. Section 1031 like-kind exchanges for real property remained fully in place, with no new dollar cap and no per-lifetime limit. The proposed $500,000 deferral ceiling that had circulated in earlier drafts did not make it into the final law.
In plain English: the rules you use to defer capital gains tax on an investment property sale in 2026 are the same core rules that applied before. You still have 45 days from your sale to identify replacement property and 180 days to close. The replacement property still has to be like-kind real property held for investment or business use.
It is worth remembering that the last major change to Section 1031 came from the Tax Cuts and Jobs Act of 2017, which removed personal property (things like equipment and vehicles) from 1031 treatment but preserved it for real estate. Since then, every proposal to further restrict real property exchanges has failed to advance.
A Simple Example of What Was at Stake
Consider an investor selling an apartment building for $2,000,000 with a $900,000 capital gain after accounting for basis and depreciation. Under current law, a properly structured 1031 exchange lets that investor reinvest the full proceeds into like-kind replacement property and defer the tax on the entire $900,000 gain.
Under the proposed (but never enacted) $500,000 cap, only $500,000 of that gain could have been deferred. The remaining $400,000 would have been taxable in the year of sale. At a combined federal capital gains and depreciation recapture rate, that could have meant a six-figure tax bill that today’s law does not impose. That is the difference between the rule people feared and the rule that actually exists.
What This Means for Your Timeline
The practical takeaway is that you do not need to rush a sale simply because you are worried the 1031 exchange will vanish. Tax law can always change in the future, and no one can promise what a later Congress will do. But making a major real estate decision based on a proposal that never passed is its own kind of risk. A hurried sale into the wrong replacement property can cost more than the tax you were trying to defer.
This is also where many investors start looking at Delaware Statutory Trusts (DSTs). A DST is a way to complete a 1031 exchange into a fractional interest in institutional real estate without taking on active management. DSTs are securities available only to accredited investors, and they carry their own fees, risks, and illiquidity. They are not right for everyone. But for an investor who wants to stay invested in real estate and defer gain without becoming a landlord again, a DST can be one way to meet the 45-day and 180-day deadlines with an identified, available property.
The Bottom Line
The 1031 exchange is not going away in 2026. Section 1031 survived the 2025 tax law fully intact for real property, the proposed $500,000 deferral cap did not become law, and the core rules (45 days to identify, 180 days to close, like-kind replacement property) are unchanged. Future Congresses could revisit the provision, so it is reasonable to stay informed. It is not reasonable to let a headline force a sale you are not ready to make.
The right move is the same as it has always been: plan the exchange before you sell, not after, and build your decision around your actual goals rather than around a rule that does not exist.
Thinking through a sale and want to understand your options? Talk to a Specialist about your exchange timeline and replacement-property choices, or map your deadlines with the free 1031 Calculator.
This article is for informational and educational purposes only and is not tax, legal, or investment advice. My1031Options.com is an educational resource published by Medalist Diversified, Inc. (NASDAQ: MDRR), a publicly traded company and DST sponsor. This is not an offer to sell or a solicitation of an offer to buy any security. Securities are offered only by means of a Private Placement Memorandum (PPM) and only to accredited investors as defined in Rule 501 of Regulation D under the Securities Act of 1933. All investments involve risk, including the possible loss of principal. Consult your own CPA, tax attorney, and qualified financial professional before selling investment property or executing a 1031 exchange.
