What Is a 1031 Exchange? A Complete Guide for STR Investors

## Understanding the 1031 Exchange A 1031 exchange, named after Section 1031 of the Internal Revenue Code, allows real estate investors to defer capital gains taxes when selling an investment property—as long as the proceeds are reinvested into a "like-kind" property. ### How It Works 1. **Sell your relinquished property** - The property you're selling 2. **Identify replacement properties** - Within 45 days of closing 3. **Close on replacement property** - Within 180 days of selling ### Key Benefits for STR Investors - **Tax deferral**: Defer federal capital gains taxes (up to 20%) and depreciation recapture (25%) - **Portfolio growth**: Reinvest 100% of your equity into larger or multiple properties - **Geographic flexibility**: Exchange into properties in different markets - **Asset class flexibility**: Move from one STR to another, or even to long-term rentals ### Important Requirements - Both properties must be held for investment or business use - The replacement property must be of equal or greater value - All cash proceeds must be reinvested - A Qualified Intermediary (QI) must hold the funds ### Is Your STR Eligible? Short-term rentals qualify for 1031 exchanges as long as they're held primarily for investment purposes. The IRS looks at factors like: - How long you've owned the property - Your intent when purchasing - How the property is used and managed **Ready to explore your options?** Contact Savvy 1031 to discuss your specific situation.