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Treasury Floats 1031 Exchange Limits—Should You Accelerate Your Like-Kind Deals?
George Tsividakis
June 18, 2025
New policy chatter could cap deferred gains at $400 K. Here’s the proposal, the political odds, and a step-by-step timeline to swap or refinance before the rules change.
1 | What’s on the Table?
Item | Current Rule (2025) | Treasury “Green Book” Proposal (May 2025) |
|---|---|---|
Section 1031 Limit | Unlimited deferral of capital-gain tax for like-kind real-estate exchanges | Cap deferral at $400,000 total gain per taxpayer, per year |
Implementation Date | — | January 1, 2026 (if enacted) |
Status | Requires Congressional approval | Included in FY 2026 budget outline |
Key Point: Nothing is law yet, but budget proposals often preview future tax-bill language—especially if aligned with revenue goals.
2 | Why a $400 K Cap Hurts Mid-Size Investors Most
Small Mom-and-Pop Sellers
Gains below $400 K? Business as usual.Institutional Funds
Already use UPREITs, DSTs, or accelerated depreciation strategies; a cap merely tweaks deal structure.Sweet-Spot Syndicators & Portfolio Builders
Gains on a single apartment building or industrial condo sale frequently top $1 M. Partial deferral means up-front tax bills that can slash IRR 300–500 bps.
3 | Political Odds & Timing
Date | Milestone | Probability |
|---|---|---|
Sept 2025 | House Ways & Means markup | 50 %—depends on deficit-offset priorities |
Nov 2025 | Election-year gridlock | High—big tax changes often stall |
Jan 2026 | Cap effective (if passed) | 30–40 % realistic odds |
Takeaway: A one-year runway at minimum—but don’t bet on lame-duck compromise. Most sponsors are moving now to lock gains in 2025.
4 | Speed Sheet—How Long Does a 1031 Really Take?
Task | Days | Tips to Compress |
|---|---|---|
Identify Replacement Property | 0–30 | Keep an “evergreen” wish list; use reverse exchange if inventory tight |
Contract Negotiation | 7–14 | Include financing contingency windows < 10 days |
Lender Term Sheet | 2–3 (private) / 10+ (bank) | Secure pre-approved DSCR or bridge before sale |
Close Relinquished Property | Day 0 of 45-Day ID Clock | Arrange simultaneous closings to avoid reverse exchange |
Close Replacement Property | Typically Day 30–45 | Use gap funding (bridge) if agency/CMBS timeline slips |
Total: 60–90 days if everything lines up—so a deal started in August can close before Thanksgiving.
5 | Capital-Stack Options to Fast-Track Your Swap
Scenario | Challenge | LoanFunders.com Fix |
|---|---|---|
Not enough equity until relinquished sale closes | Down-payment gap | Bridge-to-Agency Loan—80 % LTC, I/O, 12-mo term |
Competing cash buyers | Need certainty > bank letter | DSCR “proof-of-funds” letter in < 24 hrs |
Construction/Value-Add replacement | Traditional lenders balk at timing/permits | 80 % LTC renovation bridge + future DSCR refi |
Multiple small assets roll-up | Many closings, one loan | Portfolio blanket DSCR—one mortgage over 5-10 doors |
6 | Example—Multifamily Seller with $1.2 M Gain
Step | Without Cap | With Cap |
|---|---|---|
1031 Deferral | $1.2 M ↠ $0 taxable | $400 K deferred; $800 K taxed |
Fed/State Tax (24 % blended) | $0 | $192 K due at sale |
Equity Rolled into New Deal | $1.2 M | $1.008 M |
Leverage at 70 % LTV | $2.8 M purchase | $2.4 M purchase |
Lost Buying Power | — | $400 K less asset value |
A 192 K tax hit means choosing a smaller property—unless the investor sells and reinvests this year.
7 | Broker Playbook: Capture the Rush
Flag High-Basis Clients—scan 2014-2018 purchases; gains likely > $400 K.
Bundle Reverse-Exchange Partners—build a ready list of EAT (exchange accommodator titleholder) firms for inventory scarcity.
Offer “1031 Express Quotes”—white-label LoanFunders.com DSCR & bridge term sheets in 24 hrs.
Market a Countdown Calendar—email series: T-120, T-90, T-60, T-30 to push urgency.
Highlight Partial-Defer Strategy—show clients how pref-equity + bridge covers extra taxes if full deferral impossible.
8 | Action Items for Investors
Run a Gain Estimate—CPA calc or online 1031 estimator.
Map Exit Windows—target property under contract by Labor Day 2025.
Collect DSCR Package—rent roll, T-12, insurance & tax quotes.
Engage an Intermediary Early—avoid day-of-closing panic.
Stay Election-Ready—rule could still stall; don’t assume.
9 | Key Takeaways
Treasury’s $400 K cap isn’t law yet, but risk-adjusted math favors swapping sooner.
1031 timelines already push 60–90 days; a post-summer start risks 2026 spillover.
Private bridge + DSCR financing locks certainty faster than bank or agency pipelines.
Brokers who package rapid-close capital plus tax-law insights will own the client relationship through 2026.
Need “Cap-Proof” Financing?
LoanFunders.com issues 24-hour DSCR term sheets and 80 % LTV loans so you can list, contract, and close before any 1031 limit lands.
Accelerate the swap. Defer the tax. Preserve the buying power.