The 1031 exchange in Florida: the rules, the timeline, and the tax you still owe.
You have equity in Florida property, and when you sell, the goal is to keep it working, moved into your next investment rather than paid out in tax. Florida helps in one way and complicates it in a few others. Florida sellers hear two things about a 1031 exchange, and both are true: there is no state capital gains tax to worry about, and the federal exchange rules are exactly the same here as anywhere else. What gets missed is the Florida layer around the edges: a transfer tax at closing, a property-tax reset on whatever you buy, foreign-seller withholding in a state full of foreign owners, and a hurricane season that can move the deadlines. This page covers the federal rules briefly and the Florida specifics in full.
General information, not advice for your sale. The tax side of a specific Florida exchange is what our real estate tax work covers, for owners anywhere in the state.
Under contract, or mid-exchange with the clock running? There may still be time. Start with the same call.
The 1031 clock is unforgiving, and the pressure to buy something, anything, before it runs out is real. One call tells you whether an exchange even fits your sale. Sometimes the honest answer is that it does not, and we will say so.
Does Florida tax the gain? No. Here is what it taxes instead.
Florida’s constitution bars a personal income tax, so there is no Florida capital gains tax on real estate for individuals, trusts, or pass-through entities. That removes one layer from the stack. The other three federal layers and two Florida-specific costs remain, and most sellers only count one of them.
Capital gains, recapture, and the investment income tax
The federal capital gains tax on your appreciation, depreciation recapture on a rental at its own higher rate, and the net investment income tax above the income threshold all apply to a Florida sale exactly as they would anywhere. A completed 1031 exchange defers all three. A failed one owes all three in a single year.
Documentary stamp tax on the deed
Florida’s transfer tax, charged as a percentage of the sale price under Chapter 201 of the Florida Statutes (a fraction under one percent in most of the state; Miami-Dade uses its own schedule). Customarily the seller pays it in most counties. It is owed with or without an exchange, because the exchange defers income tax, not transfer tax. It is generally treated as an exchange expense payable from the proceeds without creating boot.
The property-tax reset on the replacement
Florida caps how fast the assessed value of non-homestead property can rise each year, but the cap resets when the property changes hands. The building you buy will be reassessed at its full just value the January after you close, so its property-tax bill can be well above what the seller was paying. Budget the replacement on the reassessed number, not the listing’s tax history.
Property held in a C corporation
Florida has no personal income tax, but it does have a corporate income tax. If the property is owned by a C corporation, the corporation pays Florida tax on the gain along with federal tax. Partnerships, LLCs taxed as partnerships or disregarded entities, S corporations and trusts pass the gain through to owners who owe no Florida income tax. How the property is held is one of the first things we look at.
The rules are federal. The wrinkles are Florida’s.
Section 1031 is federal law, and Florida adds no exchange statute, no state approval, and no state form. The 1031 exchange timeline in Florida is the national one: 45 calendar days from your closing to identify replacement property in writing, 180 calendar days from that same closing to acquire it, or your return due date if it comes first. A qualified intermediary holds the money throughout. Four things are different about doing it here.
Hurricanes and the deadlines
The 45- and 180-day periods have no extensions on request, but they are among the deadlines the IRS may postpone after a federally declared disaster, under Revenue Procedure 2018-58. Florida taxpayers have received that relief after several recent hurricanes. It only applies when the IRS issues a notice, only for the counties and taxpayers it names, and on its own terms. If a storm lands mid-exchange, check the notice for your county before assuming anything.
Foreign sellers and FIRPTA
Florida has more foreign-owned real estate than almost any state. When a foreign person sells U.S. real property, federal law generally requires the buyer to withhold a percentage of the price and send it to the IRS. That withholding can swallow the proceeds an exchange needs. A foreign seller planning a 1031 exchange has to address FIRPTA before the contract is signed, usually through a withholding certificate application, not at the closing table.
Nobody licenses the intermediary
Florida does not regulate qualified intermediaries, so anyone can call themselves one. Your exchange funds sit with that company for up to six months. Ask how funds are held (segregated, in your name, at a bank you can verify), what bonding and errors-and-omissions coverage they carry, and how long they have operated. A Florida address is not a requirement; a clean answer to those questions is.
The winter-closing trap
Florida’s selling season peaks in the winter and spring. A sale that closes between mid-October and year end runs into a problem: the 180-day period ends at your tax return due date if that comes first, which for most individuals is in April. Filing an extension for the return preserves the full 180 days. It is a two-minute fix that a surprising number of Florida sellers never hear about until the window has closed.
How does a 1031 exchange work in Florida, start to finish?
The sequence is the same as anywhere; the order matters more than most sellers realize, because the two decisions that protect the exchange, the intermediary and the fallback, both have to be made before the closing that starts the clock.
Your agent runs the sale and the search for replacements. Your closing agent or title company handles the deed, the doc stamps and the settlement statement. The intermediary holds the money. Your CPA reports the exchange on Form 8824 next spring. The question none of them owns is whether the exchange protects your equity, what the tax looks like if it fails, and what the fallback is when your first choices fall through. That is the layer we add, coordinated with the people you already have.
And sometimes the honest answer is that a 1031 is not the right move for your sale. When the gain is small, or you want out of real estate, paying the tax with a plan can beat an exchange you did not want. We will say so on the first call.
Florida resident, out-of-state property. Or the reverse.
Florida’s lack of an income tax follows the taxpayer, not the property. That produces two common situations with opposite answers.
You live in Florida and are selling property in another state
The state where the property sits can tax the gain as a nonresident, and several states require the closing agent to withhold state tax from a nonresident seller’s proceeds at closing. Some states also do not follow the federal exchange deferral for their own tax, or require you to keep filing with them to track the deferred gain after you exchange into Florida property. Your Florida residency does not switch any of that off. Where the property is drives the answer.
You live in another state and are selling Florida property
Florida will not tax the gain, and there is no Florida withholding on out-of-state sellers. Your home state usually will tax it, as it taxes your income from everywhere, so the exchange’s value to you is measured against your own state’s rate plus the federal layers. If you are a foreign owner, FIRPTA withholding is the item to solve before the contract is signed.
Florida 1031 questions, answered.
Every situation is different; confirm specifics with your attorney, your CPA, and your intermediary.
No. Florida has no personal income tax, so an individual, a trust, or an LLC taxed as a partnership or disregarded entity pays no Florida tax on the gain from selling real estate. The federal layers still apply in full: capital gains tax, depreciation recapture and, above the income threshold, the net investment income tax. One exception: a C corporation that owns Florida property pays Florida corporate income tax on its gain. Florida’s documentary stamp tax on the deed is a transfer tax paid at closing, not a tax on the gain.
They are the federal rules. Section 1031 is part of the Internal Revenue Code, and Florida adds no state-level exchange statute, no state approval, and no state form. You need real property held for investment or business use on both ends, the same taxpayer selling and buying, a qualified intermediary holding the proceeds, replacement property identified in writing within 45 days and acquired within 180 days, and equal or greater value and debt to defer the whole gain. What Florida adds is around the edges: documentary stamp tax at closing, a property-tax reassessment on the replacement, and, in a hurricane year, the possibility of IRS deadline relief.
The same as everywhere in the country: 45 calendar days from the closing of your sale to identify replacement property in writing, and 180 calendar days from that same closing to acquire it, or your tax return due date if that comes first. Weekends and holidays count. The only extensions are IRS disaster postponements, which Florida taxpayers have received after major hurricanes when the IRS issued a relief notice that covered the 1031 deadlines.
Generally no. A 1031 exchange is for property held for investment or business use, and your homestead is neither, regardless of its Florida homestead status, which is a property-tax matter and has no bearing on federal income tax. A home sale uses the Section 121 exclusion instead. A home that was later converted to a rental can sometimes use both provisions, and a Florida vacation home can qualify for an exchange if it meets the IRS safe harbor for rental use. Those turn on the years of use and need a fact-specific look.
No. The qualified intermediary can be anywhere in the country; what matters is that it is not a disqualified person (your attorney, CPA, agent or a related party) and that it holds your funds safely. Florida does not license or regulate qualified intermediaries, so the vetting falls to you: ask how funds are held (segregated accounts in your name are the standard), what fidelity bond and errors-and-omissions coverage the intermediary carries, how long it has operated, and get the fee schedule in writing. Your closing agent or title company will often have intermediaries they work with regularly.
Documentary stamp tax is Florida’s transfer tax on the deed, charged as a percentage of the sale price and paid at closing, customarily by the seller in most counties. It is owed whether or not you do a 1031 exchange; the exchange defers income tax, not transfer tax. Doc stamps and the other customary closing costs are generally treated as exchange expenses that can be paid from the exchange proceeds without creating taxable boot, and they reduce the amount realized on the sale. A new mortgage on the replacement property carries its own doc stamps and intangible tax, which is a budgeting item for the purchase.
They can. When a federal disaster is declared and the IRS issues a relief notice for the affected counties, the 45-day and 180-day periods are among the deadlines the IRS may postpone under Revenue Procedure 2018-58, for taxpayers who qualify as affected. Florida taxpayers have received this relief after several recent hurricanes. It is never automatic and never assumed: the notice has to be issued, you have to be covered by it, and the postponement has specific terms. If a storm lands during your exchange, check the IRS disaster relief page for your county and confirm the terms with your CPA and intermediary before relying on them.
- 26 U.S.C. §1031 and Treas. Reg. §1.1031(k)-1 — the federal exchange rules that govern in Florida.
- Florida Department of Revenue — Documentary Stamp Tax, under Chapter 201, Florida Statutes.
- Florida Department of Revenue — Corporate Income Tax; Florida has no personal income tax.
- Florida Department of Revenue — Property Tax, including the assessment limitations that reset on a change of ownership (Chapter 193, Florida Statutes).
- IRS — FIRPTA withholding on dispositions of U.S. real property by foreign persons (26 U.S.C. §1445).
- IRS — Tax relief in disaster situations and Rev. Proc. 2018-58, which lists the 1031 deadlines among those the IRS may postpone.
This page is general information about Section 1031 exchanges involving Florida real estate. It is not tax, legal, or investment advice, and it does not describe or offer any investment. Your outcome depends on facts specific to your property and your return; confirm them with your own advisors.
Your equity kept moving, on your terms.
The sale closes, the federal tax is planned for instead of stumbled into, and your equity moves into the next investment rather than into a tax bill. Where the money goes after the closing, you decide, not the deadline.