Will 1031 Exchanges Be Eliminated? Current Status in 2026

(Last updated: 31st August 2026)

Investors concerned about the possible elimination of 1031 exchanges can breathe easier for now.

Section 1031 has not been eliminated, and like-kind exchanges remain available to qualifying real estate investors in 2026. Previous proposals from the Biden administration sought to restrict the amount of gain investors could defer through a 1031 exchange, but those proposals did not become law.

Section 1031 remains part of the Internal Revenue Code, meaning investors can still defer recognition of capital gains when exchanging qualifying investment or business real estate for like-kind replacement property, provided all Section 1031 requirements are satisfied.

Are 1031 Exchanges Going Away?

No. As of 2026, there is no enacted federal law eliminating Section 1031 exchanges.

Section 1031 remains part of the Internal Revenue Code and continues to provide nonrecognition treatment when qualifying real property held for productive use in a trade or business or for investment is exchanged for qualifying like-kind real property.

This is important because speculation surrounding the future of 1031 exchanges has persisted for years. Proposals to restrict the provision appeared repeatedly during President Joe Biden’s term.

Those proposals should not be confused with current law.

The Biden administration’s proposed restrictions were never enacted. Section 1031 therefore remains a legitimate tax-deferral strategy for qualifying real estate investors.

What Is the Current 1031 Exchange Law in 2026?

Section 1031 allows an investor to defer recognition of gain when qualifying real property is exchanged for other qualifying like-kind real property.

The provision is a tax deferral mechanism, not a tax exemption. Instead of recognising the gain when the relinquished property is disposed of, the investor generally carries the property’s tax basis into the replacement property, subject to adjustments. The IRS explains the basis treatment of like-kind exchanges in Publication 551.

Current law applies Section 1031 to real property held for investment or productive use in a trade or business. Property held primarily for sale does not qualify. The IRS guidance on like-kind exchanges provides further details on which types of property may qualify.

Real property is interpreted relatively broadly for the like-kind requirement. For example, an investor may potentially exchange an apartment building for land, commercial property or another qualifying form of US real estate. The properties do not have to be identical.

However, US real property cannot be exchanged for foreign real property under Section 1031.

For a typical deferred exchange, two important deadlines also continue to apply:

• 45-day identification period: Replacement property generally must be identified within 45 days after transferring the relinquished property.
• 180-day exchange period: Replacement property generally must be received within 180 days after the transfer, or by the applicable tax return due date including extensions if earlier.

These requirements remain part of Section 1031. The IRS Instructions for Form 8824 provide further guidance on the identification and completion deadlines for deferred exchanges.

Did Donald Trump Eliminate 1031 Exchanges?

No. President Donald Trump has not eliminated Section 1031 exchanges.

Section 1031 remains part of the Internal Revenue Code under the current Trump administration, with the core framework for exchanges of qualifying investment and business real estate intact.

Investors should nevertheless distinguish the current position from Trump’s earlier Tax Cuts and Jobs Act of 2017, which did change Section 1031 significantly.

Before 2018, like-kind exchange treatment could apply to certain types of personal and intangible property as well as real estate. The Tax Cuts and Jobs Act restricted Section 1031 so that, from 2018 onwards, the provision generally applies only to qualifying real property.

The IRS confirms that Section 1031 has been limited to exchanges of real property since January 1, 2018.

Therefore, Trump-era tax reforms have previously narrowed Section 1031, but they did not eliminate the provision for real estate investors.

What Happened to Biden’s Proposed 1031 Exchange Changes?

The Biden administration repeatedly proposed restricting Section 1031 like-kind exchanges.

In the Treasury Department’s General Explanations of the Administration’s Fiscal Year 2025 Revenue Proposals, commonly known as the Green Book, the administration proposed limiting the amount of gain that could be deferred through Section 1031 to:

$500,000 per taxpayer per year or $1 million per year for married individuals filing jointly.

Gain exceeding the applicable threshold would have been recognised in the year the property was exchanged.

This would have represented a substantial change for investors conducting larger real estate transactions.

For example, suppose an investor disposed of qualifying investment property and realised a $1.5 million gain before acquiring qualifying replacement property.

Under existing Section 1031 rules, it may be possible to defer the entire $1.5 million gain if the transaction is structured correctly and all requirements are satisfied.

Under the Biden proposal, an individual taxpayer would potentially have been able to defer only $500,000, leaving the remaining $1 million of gain subject to recognition.

However, the proposal never became law.

The Biden administration’s attempts to restrict Section 1031 therefore remain important historically, but they do not represent the rules governing exchanges in 2026.

Why Was the Elimination of 1031 Exchanges Being Considered?

The debate surrounding Section 1031 largely comes down to different interpretations of what the provision represents.

Critics have sometimes characterised 1031 exchanges as a tax preference that allows real estate investors to postpone capital gains taxes that would otherwise become due when appreciated property is sold.

From that perspective, limiting Section 1031 could increase federal tax receipts, particularly from investors undertaking high-value property transactions.

Supporters see the provision differently.

A 1031 exchange does not normally erase the underlying taxable gain. Instead, recognition of the gain is postponed as the investor continues holding qualifying investment property.

The IRS describes a properly executed like-kind exchange as postponing recognition of gain by shifting the basis into the replacement property.

Because an investor can reinvest capital that might otherwise have been used to pay tax, Section 1031 may encourage property owners to sell and reinvest rather than continuing to hold properties primarily because of the tax consequences of selling.

This distinction sits at the centre of the policy debate.

What Would Happen If 1031 Exchanges Were Eliminated?

Although Section 1031 remains available today, Congress could theoretically amend or repeal it in the future.

If Section 1031 were eliminated entirely, selling appreciated investment real estate would generally become a taxable event without the existing like-kind exchange mechanism for deferring the gain into replacement property.

Consider an investor with:

Property sale price: $2,000,000
Adjusted tax basis: $800,000
Approximate realised gain: $1,200,000

This is deliberately simplified and ignores transaction costs, depreciation-related issues and other adjustments that could affect the actual taxable gain.

Under a properly structured 1031 exchange, recognition of some or potentially all of that gain may be deferred by acquiring qualifying replacement real estate.

Without Section 1031, the investor could instead face current taxation when the property is sold.

That could reduce the amount of equity available to invest in the next property.

The consequences could therefore extend beyond the investor’s immediate tax bill.

Less Capital Available for Reinvestment

One of the principal attractions of a 1031 exchange is the ability to keep more investment capital working.

If an investor sells a property and immediately incurs tax on the gain, less equity may be available for the next acquisition.

Section 1031 allows qualifying investors to move capital from one property to another without necessarily triggering immediate recognition of the accumulated gain.

Investors Could Hold Properties for Longer

Taxes affect investment decisions.

An owner with substantial unrealised appreciation may be reluctant to sell an existing property if doing so creates a large immediate tax liability.

The availability of a 1031 exchange reduces this potential “lock-in” effect by allowing qualifying investors to dispose of one property and continue their investment through another.

Without the exchange mechanism, some owners might choose to retain properties for longer rather than sell.

Real Estate Transaction Activity Could Be Affected

Reduced willingness to sell could also affect the wider property market.

Section 1031 exchanges generate transactions involving buyers, sellers, brokers, qualified intermediaries, lenders, title companies, attorneys and other professional services.

The exact economic consequences of eliminating Section 1031 would depend upon what replaced it and how investors responded. It is therefore impossible to state precisely how transaction volumes or property values would react to repeal.

However, removing a major tax-deferral mechanism would clearly change the economics surrounding the sale and reinvestment of appreciated real estate.

Why Do Real Estate Investors Use 1031 Exchanges?

The principal advantage of Section 1031 is the ability to defer recognition of capital gain while continuing to invest in real estate.

Imagine an investor originally purchased a rental property for $500,000 and, after adjustments to basis, later sells it for $900,000.

A conventional taxable sale could result in recognition of gain.

If the transaction instead qualifies under Section 1031, the investor may be able to reinvest into qualifying replacement property without recognising all of that gain immediately. The IRS provides a detailed explanation of qualifying like-kind exchanges in Publication 544.

That creates several potential strategic uses. An investor might exchange:

• a smaller property for a larger property;
• several properties for a single property;
• one property for multiple replacement properties;
• actively managed rental property for a more passive real estate investment;
• property in one geographical market for property in another US market; or
• one type of qualifying investment real estate for another.

Section 1031 can therefore be used not merely for tax planning but as part of a wider real estate portfolio strategy.

Does a 1031 Exchange Permanently Avoid Capital Gains Tax?

Not necessarily. Describing a 1031 exchange simply as a way to “avoid capital gains tax” is misleading. The fundamental benefit is deferral.

When gain is deferred through an exchange, the basis of the replacement property generally reflects the basis carried over from the relinquished property, subject to the specific calculations required under the tax rules.

As the IRS explains in Publication 551, the basis of property received in a qualifying nontaxable exchange is generally derived from the basis of the property given up.

That deferred gain can consequently remain embedded within the replacement property.

If the replacement property is later sold in a taxable transaction without another qualifying exchange, previously deferred gain may become recognisable.

Some investors undertake successive exchanges, sometimes described informally as “swap till you drop”, but estate planning and inherited property introduce additional tax rules that should be considered separately with qualified tax and legal advisers.

Section 1031 should therefore primarily be understood as a mechanism for postponing recognition of gain while capital remains invested, rather than automatically eliminating the tax.

Could 1031 Exchanges Still Be Eliminated in the Future?

Yes. Congress can change federal tax law, so nobody can guarantee that Section 1031 will remain unchanged indefinitely.

Its history demonstrates this. Section 1031 has existed in various forms for more than a century, but Congress has amended the rules numerous times.

Most recently, the Tax Cuts and Jobs Act significantly narrowed its scope by restricting like-kind exchanges to real property.

The Biden administration subsequently proposed imposing limits on real estate exchanges, although those proposals were not enacted.

The correct conclusion is therefore not that Section 1031 can never be eliminated.

It is that there is a major difference between a political proposal and enacted tax law.

Investors should be cautious when headlines suggest that “1031 exchanges are going away”. A presidential budget proposal, policy paper or bill introduced in Congress does not itself change Section 1031.

Legislation must ultimately be enacted before the tax rules change.

Investors who want to establish the current position should therefore check the current text of Section 1031 in the United States Code rather than relying on older reports about proposed tax changes.

Should Investors Rush to Complete a 1031 Exchange Before the Rules Change?

There is currently no reason to conduct an otherwise unsuitable property transaction purely on the assumption that Section 1031 is about to disappear.

As of 2026, Section 1031 remains in force.

Real estate decisions should primarily make economic and investment sense. Tax treatment is important, but it should not turn a poor property investment into a good one.

Investors considering a sale should instead determine whether a 1031 exchange fits their objectives and, if so, prepare before disposing of the relinquished property.

This is particularly important for deferred exchanges because the transaction generally needs to be structured correctly from the outset.

The IRS Instructions for Form 8824 specifically address deferred exchanges involving qualified intermediaries and the applicable identification and completion deadlines.

Investors therefore need to understand the exchange requirements before completing the disposal rather than treating Section 1031 as something that can simply be applied retrospectively to an ordinary property sale.

What Alternatives Exist If 1031 Exchanges Are Eventually Restricted?

If Congress restricts Section 1031 in the future, investors would need to consider other tax and investment strategies based on the law applicable at that time.

Potential strategies could include installment sales, holding rather than selling appreciated property, certain Opportunity Zone investments where applicable, estate planning strategies or simply recognising the gain and reinvesting the after-tax proceeds.

For example, the IRS provides separate guidance on installment sales in Publication 537, under which at least one payment is received after the tax year in which a qualifying sale occurs.

These alternatives do not replicate Section 1031 and have their own eligibility requirements, risks and tax consequences.

Investors should therefore avoid structuring transactions today based on speculation about what Congress might do in the future.

Frequently Asked Questions

Will 1031 exchanges be eliminated in 2026?

Section 1031 has not been eliminated. As of 2026, qualifying exchanges of business or investment real property can continue to receive Section 1031 treatment when the statutory and regulatory requirements are satisfied.

Did Biden eliminate the 1031 exchange?

No. The Biden administration proposed limiting the amount of gain that could be deferred through Section 1031 to $500,000 annually for an individual taxpayer or $1 million for married individuals filing jointly. The proposal can be found in the Treasury Department’s Fiscal Year 2025 revenue proposals, but it was not enacted into law.

Did Trump eliminate 1031 exchanges?

No. Section 1031 remains part of the Internal Revenue Code under President Donald Trump. The provision continues to apply to qualifying exchanges of real property held for investment or productive use in a trade or business.

Are 1031 exchanges still allowed in 2026?

Yes. Section 1031 remains available for qualifying exchanges of real property held for investment or productive use in a trade or business. Current IRS like-kind exchange guidance continues to explain how the provision operates.

Is there a $500,000 limit on 1031 exchanges?

No general $500,000 limit on deferred gain currently applies under Section 1031. The $500,000 figure came from proposals made during the Biden administration. Those proposals were not enacted.

Can Congress eliminate 1031 exchanges?

Yes. Section 1031 is part of federal tax law, and Congress could amend, restrict or repeal it through future legislation. However, possible future changes should not be confused with current law.

What was the last major restriction on 1031 exchanges?

The Tax Cuts and Jobs Act of 2017 restricted Section 1031 exchanges to real property. Before that change, certain personal and intangible property could also qualify for like-kind exchange treatment. The IRS explains the post-2017 restriction in its current guidance.

The Bottom Line

1031 exchanges have not been eliminated and remain available under current law in 2026.

Much of the uncertainty surrounding Section 1031 arose from proposals made during the Biden administration to restrict the amount of gain that real estate investors could defer. Those proposals did not become law.

For qualifying real estate investors, the fundamental benefit therefore remains available: gain on the disposition of investment or business real property can potentially be deferred when the property is exchanged for qualifying like-kind replacement real estate and the requirements of Section 1031 are satisfied.

That does not guarantee Section 1031 will remain unchanged forever. Congress has modified the provision before and could do so again.

For now, however, investors should make decisions based on the law that actually exists rather than speculation about its elimination.

This article is for informational purposes only and does not constitute tax, legal or investment advice. Section 1031 transactions can involve complex tax consequences. Investors should consult qualified tax and legal professionals regarding their individual circumstances.