Frequently Asked Questions

What is a 1031 exchange and how does it work in Florida?

A 1031 exchange (named after Section 1031 of the IRS tax code) allows real estate investors to defer capital gains taxes when selling an investment property, provided they reinvest the proceeds into a "like-kind" replacement property. In Florida, the process works the same as in any other state: you sell your relinquished property, a qualified intermediary (QI) holds the proceeds, you identify replacement properties within 45 days, and you close on the replacement within 180 days. Florida has no additional state-level 1031 requirements.

What is the 45-day identification rule in a 1031 exchange?

After closing on the sale of your relinquished property, you have exactly 45 calendar days to identify potential replacement properties in writing to your qualified intermediary. You can identify up to three properties of any value (the "3-property rule"), or more properties if their combined value does not exceed 200% of the relinquished property value (the "200% rule"). Missing the 45-day deadline disqualifies the exchange entirely — there are no extensions.

Can I use a 1031 exchange to buy a vacation rental on the Emerald Coast?

Yes — vacation rental properties on the Emerald Coast can qualify as 1031 exchange replacement properties, provided they meet the IRS "held for investment" standard. The property must be rented at fair market value for at least 14 days per year, and your personal use must not exceed 14 days or 10% of the days it is rented, whichever is greater. Properties used primarily as personal vacation homes do not qualify. Kinsey Haddock P.A. works with investors identifying Gulf Coast vacation rentals as 1031 replacement properties.

What is "boot" in a 1031 exchange?

Boot is any portion of the exchange proceeds that is not reinvested into the replacement property. Common forms of boot include: cash received at closing (cash boot), mortgage relief where the replacement property has less debt than the relinquished property (mortgage boot), and personal property received. Boot is taxable in the year of the exchange. To fully defer all capital gains taxes, the replacement property must be of equal or greater value and carry equal or greater debt than the relinquished property.

How do I find a qualified intermediary for a 1031 exchange in Florida?

A qualified intermediary (QI) is a third party who holds your exchange proceeds between the sale and the purchase. The QI cannot be your attorney, accountant, real estate agent, or anyone who has worked for you in the past two years. Look for a QI that is a member of the Federation of Exchange Accommodators (FEA), carries fidelity bond and errors-and-omissions insurance, and has experience with Florida real estate transactions. Kinsey Haddock P.A. can refer investors to experienced QIs active in the Emerald Coast market.