Selling an investment property and eyeing Tallahassee’s steady rental demand? A 1031 exchange can help you defer federal capital gains so you keep more dollars working for you. The key is nailing strict IRS timelines and planning for Leon County’s local costs. In this guide, you’ll learn the rules, deadlines, and local insights that make reinvesting in Leon County smoother and smarter. Let’s dive in.
What a 1031 exchange does
A 1031 exchange lets you sell investment or business real estate and reinvest the proceeds into other like‑kind real estate while deferring federal capital gains tax. Since 2018, only real property qualifies. Primary residences generally do not qualify unless properly converted to investment use first. IRS instructions for Form 8824 walk through the basics and reporting.
Deadlines: 45 and 180 days
Timing is everything. You must identify replacement property within 45 days of selling your relinquished property. You must close on your replacement property within 180 days of that sale or by your tax return due date, whichever is earlier. These deadlines are firm. See the IRS Form 8824 instructions for details.
Example timeline
- Day 0: Close the sale of your relinquished property. Funds go to a Qualified Intermediary.
- By Day 45: Submit your written identification of replacement property to your QI.
- By Day 180: Close on the replacement property and complete the exchange.
Identification rules you must follow
The IRS allows several ways to identify properties within 45 days:
- Three‑property rule: Identify up to three properties, any value.
- 200% rule: Identify any number of properties as long as the total value is no more than 200% of what you sold.
- 95% rule: Identify more than allowed above only if you acquire at least 95% of the total identified value. Learn more about these options and documentation requirements in this overview of 1031 identification rules.
Leon County closing costs and Florida taxes
Florida does not have a state personal income tax, so there is no state capital gains tax for individuals. Federal rules still apply. See this summary of Florida’s tax environment.
When you buy or sell in Leon County, plan for:
- Documentary stamp tax on deeds: typically $0.70 per $100 of the sale price.
- Mortgage documentary stamp: usually $0.35 per $100 on new mortgages.
- Intangible tax on certain financings: $0.20 per $100.
- Recording fees: added per document and page. Local collection and recording are handled by the Clerk’s office. Review current details with the Leon County Clerk of Court.
For property tax and exemption questions, including homestead filing and portability, contact the Leon County Property Appraiser.
Replacement property ideas in Leon County
Leon County’s economy is shaped by Florida State University and Florida A&M University. FSU has about 44,000 students in 2024, and together these institutions support steady rental demand near campus and along key corridors. Explore the university context via the FSU registrar.
Consider these options:
- Single‑family rentals: Simple to manage and easier to source, good for steady cash flow.
- Small multifamily: Duplex to 20 units can scale income and operations.
- Student‑focused rentals: Consistent demand near campus, but plan for seasonal turnover and active management.
- Small commercial or mixed‑use: Viable if held for investment, though underwriting and timelines can be longer.
Most U.S. real property is like‑kind to other U.S. real property. You can move from one asset class to another as long as both are held for investment or business use. See the IRS Form 8824 instructions.
Converting a home? Use the safe harbor
If you plan to convert a personal home to investment use before exchanging, or exchange into a place you might later occupy, follow the IRS safe harbor in Rev. Proc. 2008‑16. As a general rule, hold the property as a rental for at least 24 months, rent it at fair market rent for at least 14 days in each of the two years, and limit personal use. Review Rev. Proc. 2008‑16 and speak with your tax advisor.
Work with a Qualified Intermediary
You cannot take direct possession of the sale proceeds. Engage a Qualified Intermediary before closing your sale so funds are held properly and paperwork is correct. Vet the QI’s custodial controls, bonding and insurance, and experience. This guide on choosing a Qualified Intermediary outlines key questions to ask.
Avoid these pitfalls
- Missing the 45‑day or 180‑day deadlines. There are no easy fixes if you miss them. See IRS Form 8824 instructions.
- Receiving cash or other non‑like‑kind property, known as boot. Boot is taxable to the extent received.
- Failing to replace equal or greater debt when applicable. That can also create taxable boot.
- Related‑party traps. Special rules apply when buying from or selling to related parties. Review the IRS guidance and consult your CPA.
Advanced exchange options
If you find the perfect Leon County property before you sell, a reverse exchange can bridge the gap, though it adds cost and structure. If you need to renovate a replacement property, an improvement exchange can help fund upgrades during the exchange period. Both require careful planning with your QI and attorney. Learn the basics of EAT and QEAA structures in this overview of reverse and improvement exchanges.
Your next steps
- Talk to your CPA or tax attorney about your sale, basis, debt, and timing.
- Interview and select a Qualified Intermediary before you list or accept an offer.
- Pre‑screen Leon County replacement properties so you can identify quickly after your sale.
- Build your net sheet with documentary stamp tax, recording fees, and title costs. Use the Leon County Clerk resources to estimate.
- Keep all exchange documents and file IRS Form 8824 with your tax return.
Ready to map out your reinvestment strategy and source the right replacement in North Florida? Reach out to the team at Kingsley Group of Jax and we’ll help you plan your timeline, connect with experienced 1031 partners, and find properties that fit your goals.
FAQs
Can you use a 1031 exchange to buy a single‑family rental in Tallahassee?
- Yes, as long as the property will be held for investment or business use and you meet the IRS timing and identification rules outlined in the Form 8824 instructions.
What state taxes apply when you 1031 into Leon County, Florida?
- Florida has no state personal income tax, so there is no state capital gains tax for individuals, but federal rules still apply; see this Florida tax overview.
How soon can you move into your replacement property after a 1031 exchange?
- If you want IRS safe harbor protection, hold it as a rental and limit personal use for about 24 months per Rev. Proc. 2008‑16; discuss timing with your CPA.
What local closing costs should you budget for a Leon County purchase?
- Budget for the documentary stamp tax on deeds, possible mortgage doc stamps, intangible tax on certain financing, and recording fees; check current details with the Leon County Clerk.
What happens if you receive cash at closing in a 1031 exchange?
- Cash or other non‑like‑kind property is boot, and you will recognize taxable gain to the extent of the boot; see IRS guidance.
What form reports your 1031 exchange to the IRS?
- You report the exchange on IRS Form 8824 with your federal tax return.
