1031 Exchange 45-Day and 180-Day Rules: A Texas Investor's Timeline
A 1031 exchange lets you defer federal tax on the sale of investment property, but only if you hit two deadlines that almost never move: 45 days to identify replacement property and 180 days to close on it. This guide explains how each deadline is counted, the identification rules that go with them, and how Texas investors keep both closings on schedule.
When the Clock Starts
Both deadlines start on the day you transfer your relinquished property, normally the closing date of your sale. The days are calendar days, including weekends and holidays, and neither deadline is extended because it falls on a weekend. The only common extension is for taxpayers affected by a federally declared disaster, under IRS guidance issued for that disaster.
The 45-Day Identification Rule
By midnight of day 45 you must identify your replacement property in a signed, written notice delivered to your qualified intermediary, with an unambiguous description such as a street address or legal description. Property you close on within the 45 days counts as identified. You can choose one of three identification rules:
- Three-property rule: identify up to three properties of any value.
- 200% rule: identify any number of properties whose total value is no more than twice the value of what you sold.
- 95% rule: identify more than that, but only if you actually acquire at least 95 percent of the total value identified.
The 180-Day Closing Rule
You must receive the replacement property by the earlier of day 180 or the due date, including extensions, of your federal tax return for the year of the sale. That second limit catches investors who sell late in the year: a sale in mid-November can hit the April 15 return due date before day 180, so file an extension if you need the full period. The 180 days run at the same time as the 45 days, not after them.
Example Timeline
- March 3: you close the sale of a rental house in Allen; proceeds go to your qualified intermediary.
- April 17 (day 45): your written identification of up to three properties is due to the QI.
- August 30 (day 180): the replacement purchase, for example a fourplex in Sugar Land, must be closed.
How Texas Investors Stay on Schedule
- Shop for replacement property before your sale closes, so the 45 days are spent negotiating, not searching.
- Order title on the replacement property as soon as it is under contract; title issues are the most common cause of late closings.
- Write your feasibility and financing deadlines in the purchase contract so they end well before day 180.
- Keep the same taxpayer on both sides. If an LLC sold, the same LLC (or you, if it is a single-member disregarded entity) should buy.
- Remember Texas has no state income tax, so the exchange is about deferring federal capital gains and depreciation recapture.
Frequently Asked Questions
Can I change my identified properties?
Yes, but only until the end of day 45, by a signed written revocation and new identification delivered to your QI. After day 45 the list is final.
What if I miss the 45-day deadline?
The exchange fails and the sale is generally taxed as an ordinary sale. Your QI releases the funds under the terms of your exchange agreement. Talk to your CPA right away.
Can I buy the replacement property first?
Yes, through a reverse exchange, where an exchange accommodation titleholder holds one of the properties. The same 45 and 180-day limits apply, counted from when the titleholder acquires the property.
Close Both Sides of Your Exchange With Cottonwood
For the full process, read 1031 exchange rules in Texas. Our Sugar Land and Allen offices coordinate with your qualified intermediary on the sale and the purchase; see our 1031 exchange closing services. This article is general information, not tax advice.