What qualifies as like-kind property?
For real estate, “like-kind” is broad: almost any U.S. real property held for investment or business use qualifies to exchange for almost any other. Raw land, apartments, retail, and industrial are all like-kind to each other. Since 2018, only real property qualifies — personal property no longer does — and primary residences and flips are excluded.
“Like-kind” is about use, not type
The term trips people up. For real estate, like-kind refers to the nature and use of the property — investment or business real property — not its type or grade. So you can exchange:
- Raw land for an apartment building
- A retail strip center for an industrial warehouse
- A single rental for a share of a larger asset
As long as both sides are U.S. real property held for investment or business, they’re like-kind to each other. Fractional interests count too — Delaware Statutory Trusts (DSTs) and tenant-in-common (TIC) interests can serve as qualifying replacement property.
What does not qualify
- Your primary residence or second home. These are personal-use, not investment. A home sale has its own break — the Section 121 exclusion — not 1031.
- Property held mainly for resale. Flips and dealer inventory don’t qualify — the property has to be held for investment or business use.
- Foreign real estate. U.S. property is not like-kind to property outside the United States.
- Personal property. Since the 2017 tax law, equipment, vehicles, and other non-real assets no longer qualify — 1031 is real-property-only now.
- Partnership interests, stocks, bonds, and notes. These are excluded outright.
The gray areas
A mixed-use property — part personal residence, part rental — can have only its investment portion qualify. A vacation home may qualify only if it meets a strict rental-and-limited-personal-use safe harbor. These edges are exactly where a tax advisor and qualified intermediary earn their fee, so get guidance before you assume a property qualifies.