Like-Kind Property in 1031 Exchanges: What Qualifies in 2025?

If you are active in real estate, you’ve probably heard of the 1031 exchange Florida. It’s a tool that lets you sell an investment property and buy another without paying capital gains tax right away. Many investors use it to keep their money working instead of losing a large portion to taxes.

But one detail always causes confusion. What actually counts as like-kind property? In 2025, the definition is broad but comes with rules you need to follow. Let’s break it down step by step.

What Is a 1031 Exchange?

A 1031 exchange comes from Section 1031 of the IRS code. It allows you to swap one property held for investment or business use for another. When done correctly, you can defer capital gains taxes.

Think of it as trading up. Instead of cashing out, you keep rolling your money forward into new real estate. This helps you grow wealth and scale your portfolio over time.

What Qualifies as Like-Kind Property?

Like-kind does not mean identical. It simply means the property is similar in nature or character. For real estate, this definition is very flexible.

Here are examples that qualify:

• Vacant land exchanged for an office building
• A rental apartment traded for a strip mall
• A warehouse exchanged for farmland
• A single-family rental traded for a hotel property

As long as both properties are used for business or investment, they qualify. The location can be different. The type can be different. What matters most is that both are real estate investments.

What Doesn’t Qualify?

Some properties do not meet the rules. These include:

1. Your personal home
2. Property you buy to flip quickly
3. Inventory or land held mainly for resale
4. Stocks, bonds, or partnership shares
5. Personal property like cars or art

The rule is simple. If you hold the property for personal use, it won’t qualify. If it is an investment, it likely will.

Qualifying Properties for a 1031 Exchange

To make things clearer, here are some common qualifying property exchanges:

• Raw land for a rental building
• A small retail property for a larger shopping center
• An industrial facility for a multifamily apartment complex
• A vacation rental for farmland

This flexibility makes 1031 exchange services so important. With the right planning, investors can adjust their portfolios without triggering a big tax bill.

2025 Updates: What’s New This Year?

In 2025, 1031 exchanges remain strong, but there are a few updates. The IRS now asks for clearer proof of investment intent. That means good records and clear paperwork. Holding periods also matter more.

If you want to show investment intent, you should plan to hold the property for some time before exchanging it. The guidance suggests at least one to two years is a safe range.

Another update relates to tighter deadlines for paperwork. Investors must be extra careful with timing. The 45-day identification rule and the 180-day completion rule are still in place. Missing these windows can ruin the exchange.

A 1031 Exchange Can Be a Powerful Tax Strategy

The power of the 1031 exchange lies in tax deferral. You can keep trading up into bigger properties without paying taxes at each step. This lets your investment capital grow.

For example:

• You sell a rental home for $500,000.
• Normally, you’d pay tax on the gain.
• With a 1031 exchange, you reinvest all $500,000 into a new property.
• Over time, you keep repeating this, moving into larger and more profitable investments.

This strategy allows compound growth without the drag of taxes slowing you down.

Do Properties Have to Be in the Same Asset Class to Be Like-Kind?

No. You don’t need to stick to the same type of property. A farm can be traded for a retail store. A hotel can be swapped for raw land. The IRS allows flexibility.

This is why so many investors use 1031 exchanges. They can shift focus, change markets, and try new property types without giving up their tax advantages.

Do Rental Properties Count as Like-Kind for 1031 Exchanges?

Yes, rental properties are some of the most common assets used in exchanges. A single-family rental, duplex, or vacation rental can all qualify.

For instance, investors in 1031 exchange Florida markets often trade smaller rental homes for larger apartment complexes. This lets them scale up their income streams while deferring taxes.

What Is Property Held for Sale or Resale?

This is where many investors get tripped up. Property held for resale is not eligible. The IRS views this as inventory, not investment.

For example, if you buy land only to resell quickly, that is resale property. If you flip a house right after purchase, that is resale property. The IRS expects you to hold your property as an investment for a period before exchanging it.

Can You Do a 1031 Exchange on Personal Property?

No. Since 2017, personal property no longer qualifies. That means things like cars, equipment, artwork, or collectibles are not eligible.

The 1031 exchange is now focused on real estate only. This makes the rules cleaner but also means investors need to keep exchanges within the real estate market

Final Thoughts

In 2025, the 1031 exchange Florida continues to be one of the strongest tools for real estate investors. Like-kind property rules remain flexible, but the IRS expects clear proof of investment intent and proper paperwork. Rental homes, farmland, office buildings, retail space, and industrial properties all qualify. Personal residences, flips, and inventory do not.

Used correctly, this strategy can help you grow your portfolio while deferring taxes at each step. For expert support and guidance, many investors trust Altfn.