Understand state-level 1031 exchange conformity and special requirements across the United States
Every state has unique rules regarding 1031 exchanges. Use our interactive map to explore state-specific conformity status, capital gains tax rates, clawback provisions, and required forms to ensure full compliance with multi-state exchanges.
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Showing 51 of 51 jurisdictions
Full Conformity
State fully conforms to federal 1031 exchange rules
Partial Conformity
State generally conforms with specific modifications
Special Rules
State has unique requirements or significant exceptions
Non-conformity
State does not recognize or significantly restricts 1031 exchanges
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Click any state on the map to view its 1031 exchange rules and requirements
Understanding state-level 1031 exchange rules is critical for successful multi-state transactions and long-term tax planning. Expand each section below to learn more.
When conducting a 1031 exchange involving properties in multiple states, you must comply with each state's unique requirements. While the IRS governs federal 1031 rules, states have autonomy to set their own conformity policies, exceptions, and reporting requirements. Failing to understand state-specific rules can result in unexpected tax liabilities, even when the federal exchange is executed perfectly. Some states may require additional forms, have different holding period interpretations, or impose special reporting obligations that go beyond federal requirements. Before executing a multi-state exchange, consult with tax professionals licensed in each relevant jurisdiction to ensure full compliance with both federal and state rules.
If you complete a 1031 exchange and later move to a different state, you may face tax consequences depending on both states' rules. Some states, like California, have "clawback" provisions that can tax previously deferred gains when you become a resident of another state or sell property outside the state. These clawback provisions aim to ensure that states collect tax on appreciation that occurred while you were a resident, even if the gain was deferred federally through a 1031 exchange. Understanding these implications before relocating is critical for long-term tax planning. If you're considering a move, consult with tax professionals in both your current state and your destination state to understand potential tax consequences. Key considerations when moving states: • Will your former state attempt to tax deferred gains? • Does your new state recognize the 1031 exchange deferral? • Are there any notification or reporting requirements? • How will the change of residency affect future property sales?
Not all states automatically conform to federal tax law changes, including updates to Section 1031. Some states adopt federal rules with a delay, while others explicitly decouple from certain provisions. This means an exchange that qualifies federally might not qualify at the state level, requiring you to pay state capital gains tax despite federal deferral. This non-conformity can create complex tax situations where you have different tax bases for federal and state purposes. States may differ from federal rules in several ways: • Timing of conformity to federal law changes • Recognition of certain types of like-kind property • Treatment of related party exchanges • Reporting and documentation requirements • Calculation of boot and recognized gain Always verify that your exchange qualifies under both federal and applicable state rules. What works for the IRS may not work for your state tax authority.
Beyond conformity status, states can impose unique challenges that can derail an otherwise successful 1031 exchange: Special forms and reporting: Some states require additional forms beyond federal requirements. Filing these forms late or incorrectly can result in penalties or loss of deferral benefits at the state level. Different holding periods: While federal law doesn't specify an exact holding period, states may have their own interpretations of what constitutes investment intent. Some states may challenge exchanges where property wasn't held long enough. Clawback provisions: Retroactive taxation when certain conditions change, such as moving to another state or selling property outside your resident state. California is the most notable example, but other states have similar rules. Multi-member LLC rules: State-specific treatment of partnership interests and LLC ownership can affect whether an exchange qualifies. Some states may not recognize exchanges involving certain entity types. Installment sale interactions: How states handle exchanges combined with seller financing can vary significantly. Some states may treat portions of the transaction differently than federal law. Understanding these nuances is essential for avoiding costly mistakes. Work with professionals who understand both federal and state-specific requirements for 1031 exchanges.
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