1031 Exchanges in 2026: A Las Vegas Investor's Guide to Deferring Capital Gains

By Jacob Ballew, Sphere Real Estate | Rules verified as of November 12, 2026

If you own a rental, a piece of land, or a commercial building that has appreciated over the last several years, there's a good chance you've thought about what selling would actually cost you in taxes. For a lot of the investors I work with, that number is the single biggest reason they hold a property longer than they really want to. A 1031 exchange is the tool that can change that math, and since it's one of the questions I get asked most, I wanted to put everything in one place for you, checked against the IRS and other primary sources.

My goal here isn't to talk you into an exchange. It's to give you a clear picture of how the rules work, where people get tripped up, and which questions to bring to your CPA before you ever list.

What a 1031 Exchange Actually Does

Section 1031 of the Internal Revenue Code lets you sell real property you hold for investment or business use and roll the proceeds into other like-kind real property without recognizing the gain at the time of the sale. According to the IRS, when you exchange business or investment real property solely for other business or investment property of the same type, you are not required to recognize a gain or loss on that exchange.

The word that matters most is deferral. The IRS has been direct about this for years, stating that gain deferred in a like-kind exchange "is tax-deferred, but it is not tax-free." Your original basis carries over into the replacement property, with adjustments, so the deferred gain follows you until you eventually sell in a taxable transaction. What you get in exchange is the ability to keep your full equity working instead of sending a portion of it to the IRS. On a highly appreciated property, that can mean deferring federal capital gains tax, depreciation recapture taxed at up to 25 percent, and the 3.8 percent net investment income tax that applies to higher earners.

What Qualifies, and What Doesn't

Since the Tax Cuts and Jobs Act took effect in 2018, Section 1031 applies only to real property. Machinery, vehicles, artwork, collectibles, and intellectual property no longer qualify. The good news is that "like-kind" is very broad when it comes to real estate. The IRS considers properties like-kind if they share the same nature or character, even if they differ in grade or quality, and real property generally qualifies whether it's improved or unimproved. In practice, that means a rental house can typically be exchanged for vacant land, a fourplex, a retail building, or an industrial property.

There are a few important exclusions. Both the property you sell and the property you buy have to be held for investment or productive use in a business, so your primary residence doesn't qualify. Property held primarily for sale, like a fix-and-flip, doesn't qualify either. And real property in the United States is not like-kind to real property outside the United States, so a Henderson rental can't be traded for a villa in Cabo.

The Two Deadlines That Make or Break Your Exchange

Most exchanges today are delayed exchanges, meaning you sell first and buy later. That's where the clock comes in, and it is strict. You have 45 days from the day you transfer your property to identify potential replacement properties. You then have to receive the replacement property within 180 days of that same sale date, or by the due date of your tax return for that year including extensions, whichever comes first. The two periods run at the same time. You don't get 45 days and then another 180; the 180 includes the 45.

The tax return detail catches people every year. If you sell in the fourth quarter, your unextended April filing deadline can land before day 180. Utah State University Extension's tax education program notes that for exchanges late in the year, you may need to file an extension to use the full 180 days, and federal courts have held that only an extension you actually file counts. If you're planning to sell in October, November, or December, put "file an extension" on your list now.

These deadlines don't bend. The IRS states they can't be extended for any circumstance or hardship, with a narrow exception for presidentially declared disasters.

How to Identify Replacement Properties

Your identification has to be in writing, signed by you, and delivered to someone involved in the exchange, such as your qualified intermediary or the seller of the replacement property. Telling your attorney, your accountant, or your real estate agent, including me, does not count. Each property needs a clear description, such as a legal description, street address, or distinguishable name.

You also need to stay within one of three identification rules. Under the three-property rule, you can identify up to three properties of any value, which is what most investors use, usually naming one target and two backups. Under the 200 percent rule, you can identify any number of properties as long as their combined fair market value doesn't exceed 200 percent of the value of what you sold. Under the 95 percent rule, you can go beyond both limits, but only if you actually acquire at least 95 percent of the total value of everything you identified, which is why it's rarely used. If you close on a replacement property within the 45-day window itself, it's treated as identified.

In a market like Las Vegas, where the right property in Summerlin, MacDonald Highlands, or Southern Highlands may not be on the MLS the week your sale closes, I recommend we start looking at replacement options before you close so your 45 days aren't spent scrambling.

Never Touch the Money: The Qualified Intermediary

If you receive the sale proceeds before the exchange is complete, even briefly, the IRS warns it may disqualify the entire transaction. The standard solution is a qualified intermediary, a third party who holds your funds between the sale and the purchase. You can't act as your own intermediary, and neither can anyone who has served as your real estate agent or broker, accountant, attorney, investment banker or broker, or employee within the previous two years.

Choose your intermediary carefully. The IRS has cautioned that some intermediaries have gone bankrupt or failed to meet their obligations, causing taxpayers to miss deadlines and lose their deferral. Ask about bonding, insurance, how client funds are held, and how long the company has been in business, and make sure the intermediary is engaged before your sale closes.

Boot: Where Taxable Surprises Come From

Any cash or non-like-kind property you receive in an exchange is called "boot," and you'll owe tax on your gain up to the value of that boot. The exchange itself can still be valid; you're just taxed on that portion. Taking cash out at closing is the obvious example, but debt relief can count too. If your old property carried a $600,000 mortgage and your new one carries $400,000, that $200,000 reduction can be treated much like cash unless you offset it with additional money.

The rule of thumb investors follow to fully defer is to buy property of equal or greater value, reinvest all of the net equity, and replace any debt that gets paid off, either with new financing or added cash. Your CPA can run the exact numbers for your situation, and I'd encourage you to do that before we set a list price.

Did the 2025 Tax Bill Change 1031 Exchanges?

No. There were serious proposals over the last several years to cap or eliminate like-kind exchanges, but when the One Big Beautiful Bill Act was signed on July 4, 2025, Section 1031 was left intact. The National Association of REALTORS® listed "no limitations or repeal of section 1031 like-kind exchanges" among the bill's notable outcomes. As of today, there is no dollar cap, income limit, or new restriction on real estate exchanges. Because these proposals come up regularly, though, it's always worth confirming current law with your tax advisor when you're ready to act.

Selling a California Property? Read This First

So many of my clients are relocating from California that this deserves its own section. You can exchange a California investment property into Nevada real estate, and Nevada does not impose a state income tax on individuals, so future gains on your Nevada property aren't taxed at the state level.

California, however, doesn't forget the gain you deferred. Since January 1, 2014, anyone who exchanges California real property for property outside the state has to file Form FTB 3840 with the California Franchise Tax Board for the year of the exchange and every year after, until the deferred gain is recognized. When you eventually sell the out-of-state property in a taxable sale, California expects its tax on the deferred California-source gain, even if you've since become a Nevada resident. The exchange defers California tax; it doesn't erase it. If you're making this move, work with a CPA who understands both states and make sure that annual filing never gets missed.

Vacation Homes and Converting to a Primary Residence

A second home you use personally generally doesn't qualify for an exchange. The IRS does provide a safe harbor in Revenue Procedure 2008-16: a home can be treated as investment property if you've owned it for at least 24 months, rented it at a fair rental for 14 days or more in each of those two 12-month periods, and kept your personal use to no more than 14 days or 10 percent of the days it was rented, whichever is greater. The same test applies after the exchange if you're acquiring a home you'd like to use part of the year.

If you exchange into a property and later move in as your primary residence, a separate rule applies. Under Section 121(d)(10) of the tax code, you can't use the home sale exclusion of up to $250,000, or $500,000 for married couples filing jointly, unless you've owned that home for at least five years from the date you acquired it in the exchange, in addition to meeting the normal two-out-of-five-year use test. Depreciation you claimed while it was a rental generally can't be excluded either.

Buying Before You Sell: Reverse Exchanges

If you find the right replacement property first, a reverse exchange may be an option. In that structure, an exchange accommodation titleholder takes title to the new property and holds it for no more than 180 days while you sell your existing property. Reverse exchanges are more complex and more expensive than a standard exchange, but in a market where the best properties don't wait, they're worth knowing about.

The Long Game: Exchange, Hold, and Plan Your Estate

Many investors chain exchanges together over decades, trading up from a single rental into larger or lower-maintenance holdings each time. Under current law, IRC Section 1014 generally resets the basis of inherited property to its fair market value at the date of death, which can eliminate the accumulated deferred gain, including depreciation, for your heirs. Nevada is also a community property state, which can affect how that basis adjustment works for married couples. This is where your estate attorney and CPA become essential, because how a property is titled and held has a real effect on the outcome.

How I Can Help

I'm not a tax advisor, and I'll never pretend to be one. What I bring is the real estate side of the equation: what your property is likely worth today, what replacement options exist across Summerlin, Henderson, MacDonald Highlands, Southern Highlands, and the surrounding areas, and how to time your listing so the 45 and 180 day windows work for you instead of against you. I'm also glad to coordinate with your CPA and your intermediary so everyone is on the same page before you sign a listing agreement.

If you're even loosely considering a sale in the next year, reach out. There's no pressure and no obligation, just a straightforward conversation about your options. You can call or text me at 725.400.8911 or visit jacobnballew.com.

Jacob Ballew
Sphere Real Estate | NV License S.200611
725.400.8911 | jacobnballew.com