What Is a 1031 Exchange in New Hampshire Real Estate and How Does It Work?

If you own an investment property in New Hampshire and are thinking about selling, you may have heard the term 1031 exchange.

A 1031 exchange can allow you to defer capital gains taxes when selling an investment property — if done correctly.

Here’s how it works in New Hampshire.

What Is a 1031 Exchange?

A 1031 exchange (named after Section 1031 of the IRS tax code) allows an investor to sell one investment property and reinvest the proceeds into another qualifying property without immediately paying capital gains taxes.

Instead of paying taxes at the time of sale, the taxes are deferred into the new property.

This strategy is commonly used by investors in Plymouth, Campton, Holderness, and throughout Central New Hampshire who want to upgrade or reposition their real estate portfolio.

What Properties Qualify for a 1031 Exchange in New Hampshire?

The property must be:

• Held for investment purposes

• Not a primary residence

• Exchanged for “like-kind” investment property

Like-kind does not mean identical. It means:

• Rental property for another rental

• Multi-family for commercial

• Land for rental property

• Commercial for land

Primary homes do NOT qualify.

What Are the 1031 Exchange Deadlines?

Timing is critical.

There are two major deadlines:

1️⃣ 45-Day Identification Rule

You must identify potential replacement properties within 45 days of selling your original property.

2️⃣ 180-Day Closing Rule

You must close on the replacement property within 180 days.

If you miss either deadline, the exchange fails and capital gains taxes apply.

How Does the Money Move?

You cannot take possession of the sale proceeds.

A qualified intermediary (QI) must hold the funds during the exchange.

If you receive the funds directly, the IRS will treat it as a taxable sale.

Why Do Investors in Central New Hampshire Use 1031 Exchanges?

Investors commonly use 1031 exchanges to:

• Upgrade to larger multi-family properties

• Move from active management to passive investments

• Consolidate multiple properties into one

• Relocate investment assets within New Hampshire

• Increase cash flow

In growing areas like Plymouth and surrounding towns, this can be a powerful long-term wealth strategy.

What Taxes Are Deferred?

A properly executed 1031 exchange can defer:

• Federal capital gains tax

• State capital gains tax (if applicable)

• Depreciation recapture

The taxes are not eliminated — they are deferred until a future sale without an exchange.

Is a 1031 Exchange Complicated?

It can be.

You must coordinate:

• Your real estate agent

• A qualified intermediary

• Your CPA

• Your closing attorney

Mistakes can be expensive.

That’s why proper planning before listing the property is critical.

Is a 1031 Exchange Right for You?

If you own rental property in Plymouth, Campton, or anywhere in Central New Hampshire and are considering selling, a 1031 exchange may help you grow your portfolio while deferring taxes.

Every situation is different, so professional tax advice is essential before moving forward.

If you’re exploring investment property options or considering selling a rental in New Hampshire, I’m happy to walk through the strategy with you.

Jim Johnson Real Estate

Phone: 857-249-7392

Serving Plymouth, Campton & Central New Hampshire

Brokered by Three Hills Real Estate Service