State vs. Federal Treatments for 1031 Exchanges

State Taxation 1031 Exchange

Different states have different treatments for 1031 exchanges and not all of the states comport to the federal standard.


One state in particular is Pennsylvania. In Pennsylvania at the state level they don't recognize deferred exchanges unless they’re simultaneous swaps. So the delayed exchanges that we're all accustomed to in which we have 45 days to identify and 180 days to complete - those work fine at the federal level but if you're selling property in Pennsylvania you will not get the deferral on the 1031 exchange if it is a delayed or non-simultaneous exchange.

A Trap for the Unwary

So the trap for the unwary is it you may think that it’s all uniform across the board, but each specific state can have different nuances and interpretations of the tax code. For folks in Pennsylvania you may recognize the gains at the state level but be able to have a partial victory in deferring them at the federal level.

  • 1031 Hotline: If you have questions about state taxation as it relates to 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.


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