3. 1031 Exchange Timelines: Don’t Miss These 2 Critical Deadlines

Welcome to Part 3 of our 1031 Exchange Blog Series. If you’ve been following along, you already know how powerful this strategy is for deferring capital gains taxes and growing your real estate portfolio.

But even the best strategy can collapse if you miss a deadline.

In this post, I’m walking you through the two most important timelines in a 1031 Exchange—and how to stay compliant, protected, and tax-deferred.

 The 45-Day Rule: Identification Period

After selling your investment property, you have exactly 45 calendar days to identify your replacement property or properties.

And it’s not just a verbal plan—you must submit this identification in writing to your Qualified Intermediary (QI).

You have a few options:

• Identify up to 3 properties of any value (most common)

• Identify more than 3 properties as long as their combined value doesn’t exceed 200% of the original sale

• Use the 95% rule if you intend to close on nearly all the properties you identify

🔒 Once the 45 days are up, your list is locked in. No changes.

📌 The New York Times has reported on investors who lost hundreds of thousands in tax savings simply because they missed this step by a day or failed to list the correct address.

 The 180-Day Rule: Closing Period

From the date you close on the sale of your relinquished property, you have 180 calendar days to complete the purchase of your replacement property.

Important:
This is not 180 days from your identification date.
The 180 days start the moment your property closes.

And the 45-day identification period is included in that 180 days—they run concurrently, not consecutively.

💡 So if you take all 45 days to identify, you only have 135 days left to close.

📰 The Wall Street Journal warns that the IRS doesn’t offer grace periods—even for holidays, lender delays, or inspection issues.
If you miss the deadline, the exchange is void—and so is your tax deferral.

 What Happens If You Miss a Deadline?

If you miss either the 45-day or 180-day window, your entire exchange is disqualified.
You’ll owe full capital gains taxes on the sale—federal, state, and possibly city.

That’s why The Real Deal often emphasizes the importance of planning early—especially in high-pressure markets like Brooklyn and NYC, where inventory moves fast and financing can take time.

 How to Stay on Track

• Work with an experienced Qualified Intermediary

• Start researching replacement properties before your sale closes

• Build in extra time for inspections, financing, and legal review

• Partner with a real estate broker who understands 1031 strategy and NYC market dynamics

 Let’s Strategize Together

At Pen Realty, we guide our clients through every step of the 1031 Exchange process—from pre-listing prep to final closing.

Thinking of selling this year? Let’s talk about how to do it strategically and tax-smart.

📧 Email: [email protected]
📞 Call/Text: 917.916.5126
▶️ Watch the vlog series on YouTube: @pmpenrealty

👉 Next up: What Qualifies as Like-Kind Property in a 1031 Exchange?