Section 1031 is federal, so the 45-day and 180-day clocks and the identification rules are identical everywhere. Florida changes the economics and the risk: no state income tax to defer, no state regulation of the company holding your money, a property-tax assessment that resets the year after you buy, and documentary stamp tax that deferral does nothing to avoid.
What Section 1031 actually gives you
A 1031 exchange lets you sell investment or business-use real property and reinvest the proceeds into like-kind replacement property without recognizing capital gain in the year of sale. The gain is not forgiven — it is carried forward into the basis of the new property. That distinction matters, and it is the single most misunderstood point in the whole subject. Tax-deferred is not tax-free.
Since the 2017 Tax Cuts and Jobs Act, Section 1031 applies to real property only. Equipment, vehicles, and personal property no longer qualify. For commercial investors that mostly means one thing: personal property conveyed with a building — furniture in a hotel, equipment in a restaurant — sits outside the exchange and should be valued and papered separately.
The two clocks
Both periods begin the day your relinquished property closes, and they run concurrently, not consecutively. Day 45 is the identification deadline. Day 180 is the closing deadline. Calendar days — weekends and federal holidays count, and neither deadline is extendable except under an IRS disaster declaration.
Your exchange period ends on the earlier of 180 days or the due date of your tax return for the year of sale, including extensions. Close a relinquished property in November and your 180 days can be cut to roughly 135 unless you file an extension. Investors lose exchanges to this every single year.
The three identification rules
| Rule | What it allows | Where it bites |
|---|---|---|
| Three Property | Identify up to three properties, any value. | Nothing, mostly. This is why it is the default — hardest rule to fail. |
| 200% | Any number of properties, combined value up to 200% of what you sold. | Blowing the 200% ceiling voids every identification, not just the last one. |
| 95% | Any number, any value. | You must actually close on 95% of the identified value. Rarely worth the risk. |
Identification must be in writing, unambiguous (street address or legal description — not “a retail building in Orlando”), signed, and delivered to your qualified intermediary before midnight on day 45.
Four things that are different in Florida
1. No state income tax — so what you are deferring is federal only
Florida has no personal income tax and therefore no state capital gains tax. A Florida-resident investor selling Florida property is deferring federal capital gains and depreciation recapture, and nothing else. That is a genuine advantage, and it is also why the math on “should I just pay the tax” is different here than it is in California or New York — the total bill you are deferring is smaller, which occasionally makes a clean taxable sale the better business decision. Size the bill you would actually be deferring.
Florida does not tax the gain, but your origin state may still claim it. California requires an annual information return (FTB Form 3840) for as long as you keep deferring gain that originated there, and taxes it when you finally cash out. Montana, Oregon and Massachusetts run similar clawbacks. Moving the asset to Florida does not by itself end the origin state’s interest — confirm with a CPA licensed in that state.
2. Florida does not regulate qualified intermediaries
You cannot touch the proceeds between closings. A qualified intermediary holds them, and if you take actual or constructive receipt, the exchange dies. The problem is that Florida imposes no licensing, bonding, or minimum-capital requirement on exchange facilitators. Nevada, Colorado, Idaho, Virginia, Washington, Maine and Oregon all regulate them in some form. Florida does not. Your money sits with an unregulated private company, and there is no state guaranty fund behind it.
Ask every intermediary for these, in writing, before you sign:
- A fidelity bond, and the amount
- Errors-and-omissions coverage, and the carrier
- Segregated qualified escrow accounts — not commingled operating funds — and the name of the institution
- Dual signature authority on any withdrawal
- Whether they are a bank affiliate or an independent shop
3. The property-tax assessment resets on your replacement property
Florida caps annual assessment increases on non-homestead property at 10% a year. Over a ten-year hold in an appreciating submarket, that cap can leave a seller’s assessed value dramatically below true market value — and their tax bill with it. That cap does not transfer to you. On a change of ownership, the property is reassessed at market value.
The practical consequence is that the tax line in a seller’s operating statement is frequently the least reliable number in the package. Underwrite the replacement property on a reset assessment at your purchase price. Exchanges that looked accretive at a 6.1% cap have turned negative in year two on this alone.
4. Documentary stamp tax still applies
Florida charges documentary stamp tax on the deed — $0.70 per $100 of consideration in every county except Miami-Dade, which uses $0.60 per $100 plus a surtax on property that is not a single-family residence. Deferring federal capital gains does nothing to avoid it, because doc stamps are a transfer tax, not an income tax. On a large exchange this is a meaningful line item that belongs in the model from the start. Confirm current rates with your title company — they are set by statute and can change.
The clock is really a financing problem
In practice, most Florida exchanges that fail do not fail on identification. They fail because debt did not clear underwriting inside the remaining window. By the time a property is identified on day 45, you may have 135 days left — and a commercial loan that takes 75 days in a calm market takes longer when anything goes sideways.
Two Florida-specific factors make that window tighter than it looks:
- Insurance has become a gating item. Florida property insurance underwriting now routinely determines whether and when a commercial loan closes. A bindable quote is often the long pole, not the appraisal. How insurance is reshaping Florida DSCR approvals · estimate a premium.
- The reset assessment changes the DSCR the lender underwrites to. Your lender sizes debt on a forward tax bill, not the seller’s. That can move proceeds materially between application and term sheet — which is exactly when you have no time to re-trade. Run the DSCR math.
Start the debt conversation before you identify — not after.
LenderMatch profiles a deal against the credit box of each lender in our network — asset class, states, loan size, leverage, and DSCR floor — and returns the ones that can actually underwrite it, before you burn days on the ones that cannot. On an exchange, the point is not finding a lender. It is finding the lender who will still be there on day 170, and having a second one running in parallel.
How Florida exchanges actually fail
- The year-end squeeze. A Q4 closing without a filed extension quietly shortens 180 days to the return due date.
- Vague identification. “A retail center in Volusia County” is not an identification. Address or legal description, signed, delivered by day 45.
- Constructive receipt. Proceeds routed through your own account, or an intermediary you control, for even a day.
- Debt shortfall creating boot. Replacing $4M of debt with $3.2M produces $800K of mortgage boot — taxable, even though you never saw cash. Check your boot exposure.
- Financing that does not clear in time. The most common one, and the most preventable.
- Underwriting the seller’s tax bill. Correct on day one, wrong the year after you close.
Frequently asked questions
Does Florida have its own 1031 exchange rules?
No. Section 1031 is federal law, and Florida does not impose a separate state-level like-kind exchange statute. What makes a Florida exchange different is everything around the deferral: Florida has no personal income tax and therefore no state capital gains tax, Florida does not license or bond qualified intermediaries, Florida resets a property’s assessed value on a change of ownership, and Florida charges documentary stamp tax on the deed. Those four facts change how a Florida exchange is planned and priced, even though the underlying IRS rules are identical everywhere.
What are the 45-day and 180-day deadlines?
From the day your relinquished property closes, you have 45 calendar days to identify replacement property in writing, and 180 calendar days to close on it. Both clocks start on the same day and run concurrently — the 180 days is not an additional period after the 45. Both are calendar days, including weekends and holidays, and neither is extendable except by an IRS-declared disaster notice. The single most common surprise: the exchange period actually ends on the earlier of 180 days or the due date of your tax return for that year, including extensions, so a fourth-quarter sale can shorten the window unless you extend the return.
How do the identification rules work?
You must identify replacement property in an unambiguous written document, signed and delivered to your qualified intermediary before midnight on day 45. Three alternatives apply: the Three Property Rule (identify up to three properties of any value), the 200% Rule (identify any number of properties whose combined fair market value does not exceed 200% of what you sold), or the 95% Rule (identify any number of any value, but you must actually acquire at least 95% of the total value identified). Most investors use the Three Property Rule because it is the hardest to fail.
Does Florida regulate qualified intermediaries?
No, and this is the most underrated risk in a Florida exchange. Several states — Nevada, Colorado, Idaho, Virginia, Washington, Maine and Oregon among them — impose registration, bonding, or insurance requirements on exchange facilitators. Florida does not. Your funds sit with an unregulated private company between closings, and there is no state guaranty fund if that company fails or absconds. Diligence is entirely on you: ask for a fidelity bond, errors-and-omissions coverage, segregated qualified escrow accounts held at a named institution, and dual signature authority on withdrawals.
Will my Florida property taxes go up after a 1031 exchange?
Very likely, and investors routinely miss it. Florida caps annual assessment increases on non-homestead property at 10%, which over a long hold can push assessed value far below market value. That cap is not portable to a buyer, and it resets on a change of ownership — so your replacement property is reassessed at current market value in the year after purchase. An exchange that pencils on the seller’s historical tax bill can turn cash-flow negative once the new assessment lands. Always underwrite the replacement property on a reset assessment, not on the tax line in the offering memorandum.
Who pays documentary stamp tax on a Florida exchange?
Florida charges documentary stamp tax on the deed at $0.70 per $100 of consideration in every county except Miami-Dade, which uses $0.60 per $100 plus a surtax on property that is not a single-family residence. A 1031 exchange does not exempt the transfer — doc stamps are a transfer tax, not an income tax, and deferral of federal capital gains does nothing to avoid them. On an eight-figure exchange this is real money and belongs in the closing statement model from day one. Confirm current rates with your title company, since rates and surtaxes are set by statute and county.
Can out-of-state investor exchange into Florida property?
Yes, and it is one of the most common exchange patterns in the state. Be aware that several high-tax states claw back deferred gain. California, for example, requires an annual information return (FTB Form 3840) for every year you continue to defer gain that originated from California property, and taxes that gain when you eventually sell without exchanging. Montana, Oregon and Massachusetts have their own versions. Florida does not tax the gain, but your origin state may still have a claim on it — confirm with a CPA licensed in the origin state before assuming the move to Florida ends your state exposure.
What happens if I cannot get financing on the replacement property in time?
You lose the exchange, and the tax bill lands in full. This is the most common practical failure in Florida exchanges right now: the property is identified on time, but debt does not clear underwriting inside the remaining window. Two structural facts make it worse in Florida — property insurance underwriting has become a gating item on commercial approvals, and the reset assessment changes the DSCR a lender is underwriting to. The defense is to start lender conversations before the relinquished property closes, not after identification, and to run a parallel second lender the whole way.
This article is general information about how 1031 exchanges work in Florida. It is not tax advice, legal advice, or an opinion on your transaction. Section 1031 is unforgiving of small mistakes, and the rates and rules cited here can change. Engage a qualified intermediary and a CPA before you list the relinquished property — not after it closes, when most of your options are already gone.
- The complete 1031 exchange FAQ — boot, DSTs, reverse exchanges, estate planning
- Tax-deferred is not tax-free — what carries forward, and what it costs later
- Florida CRE capital markets guide — who is lending, and on what terms
