The numbers that run every exchange
The three identification rules
| Rule | Limit | Who uses it |
|---|---|---|
| 3-property rule | Up to 3 properties, any combined value | The default — most exchanges |
| 200% rule | Any number of properties, up to 200% of the relinquished sale price | Investors diversifying into several smaller assets or DSTs |
| 95% rule | Any number and value — but you must acquire 95% of the identified value | Rare; effectively "buy everything you named" |
The four tax layers a 1031 defers
| Layer | 2026 rate | Applies to |
|---|---|---|
| Federal long-term capital gains | 15% or 20% | Gain above adjusted basis (20% bracket starts ~$519k single / ~$584k married) |
| Depreciation recapture | Flat 25% | All depreciation taken — often the biggest surprise line |
| Net Investment Income Tax | 3.8% | Investors above $200k single / $250k married MAGI |
| State capital gains tax | 0% – 13.3% | Varies by state — full table at state tax rates |
State tax facts (2026)
What a 1031 actually defers, by state
Tax deferred on a $500,000 gain, assuming the 20% federal bracket + 3.8% NIIT + the state's top rate. Depreciation recapture (25% of depreciation taken) comes on top of these figures.
| Seller's state | Combined rate | Tax deferred on $500k gain |
|---|---|---|
| California | 37.1% | $185,500 |
| New York | 34.7% | $173,500 |
| New Jersey | 34.55% | $172,750 |
| Oregon | 33.7% | $168,500 |
| Texas / Florida / all 8 no-tax states | 23.8% | $119,000 |
Methodology: 20% federal LTCG + 3.8% NIIT + state top rate from the 50-state dataset, applied to the full gain. Individual results vary with bracket and basis — run your own numbers in the tax calculator.
Market research on like-kind exchanges
| Finding | Figure | Source |
|---|---|---|
| Share of all U.S. commercial real estate transactions that are like-kind exchanges | ~6% | Ling & Petrova (U. Florida / Syracuse), study of 1.6M+ CRE transactions, 1997–2014 |
| Share in high-tax states (CA, OR, CO, AZ) | 10–18% | |
| Additional taxable gain when an exchanged property is later sold in a taxable sale | +19% | |
| Jobs supported by Section 1031 annually | 976,000 | Ernst & Young macroeconomic study (2021) |
| Annual U.S. GDP contribution | $97.4 billion |
Two history facts worth knowing
- Like-kind exchanges have been in the tax code for over a century — first enacted in the Revenue Act of 1921.
- Since the Tax Cuts and Jobs Act (2018), Section 1031 applies to real property only — equipment, vehicles, art, and crypto no longer qualify.
This page is maintained by Leah Badach, Certified Exchange Specialist (CES), The Sontag Group, and updated as rates and rules change. Journalists and researchers may cite freely with attribution:
Badach, L. (2026). 1031 Exchange Statistics & Key Numbers. leahbadach.com/1031-exchange-statistics/
For interviews or expert commentary on 1031 exchanges and capital-gains deferral: press & media page · [email protected]
Put these numbers to work
Statistics tell you the stakes; your own numbers tell you what to do. Two free tools: