Where to Report a 1031 Exchange on Your Tax Return

Report a 1031 like-kind exchange on Form 8824, attached to your federal tax return for the year you transferred the relinquished property. Any taxable portion of the exchange then moves from Form 8824 to Schedule D if the property was held for investment, or to Form 4797 if it was used in a business. Depreciation recapture has its own line. Getting the routing right matters because the IRS runs automated matching between Form 8824 and the rest of your return, and inconsistencies can flag the entire deferral.¹

What Form 8824 Captures

Form 8824 has three working parts. Part I identifies the exchange, Part II handles related-party disclosures, and Part III does the math that determines your recognized gain and the basis of the property you received.

Part I: Information on the Exchange

Lines 1 and 2 ask you to describe the property given up and the property received. Enter the street address and property type for each. Lines 3 through 6 capture four dates the IRS uses to check compliance: when you originally acquired the relinquished property, when you transferred it, when you identified the replacement in writing, and when you received it.² Check lines 5 and 6 against your closing documents and identification letter before you file.

Part II: Related Party Exchange Information

Line 7 asks whether the exchange involved a related party. If not, check “No” and move to Part III. If yes, complete the follow-up lines describing the relationship and the status of the two-year holding period. More on this below.

Part III: Realized Gain, Recognized Gain, and Basis

This is where the numbers land.

Line 12 is the fair market value of the like-kind property you received.
Lines 13 through 15 handle boot. Line 15 totals the cash paid to you, the value of any non-like-kind property received, and the net debt relief from the other party assuming your liabilities.²
Line 18 is the adjusted basis of the property you gave up, plus exchange expenses, plus any net amount you paid to the other party.
Line 19 is the realized gain (line 17 minus line 18).
Line 21 pulls out any ordinary income from depreciation recapture.
Line 22 is the recognized gain: generally the lesser of the boot on line 15 or the realized gain on line 19, minus the recapture on line 21.²
Line 25 is the adjusted basis of the replacement property. This number carries forward and determines depreciation on the new property and the gain you will owe when you eventually sell it.²

If you completed more than one exchange during the year, you may file a summary Form 8824 showing your name, identifying number, and the totals for line 23 (total recognized gain) and line 25 (total basis), with a separate statement giving the full details for each exchange.²

Where Recognized Gain Flows Next

If the exchange is fully deferred and you received no boot, recognized gain is zero and nothing leaves Form 8824. If you did recognize gain, it moves to one of two forms depending on how you held the property.

Investment property: report the gain on Schedule D (Form 1040). Long-term capital gains rates for 2026 are 0%, 15%, or 20% depending on your taxable income and filing status. For single filers, the 20% rate applies above $545,500 in taxable income; for married couples filing jointly, above $613,700.³
Business property: report the gain on Form 4797, line 5 or line 16.²
Depreciation recapture: the recapture amount on line 21 of Form 8824 goes to Form 4797, line 15. For real property, unrecaptured Section 1250 gain is taxed at a maximum rate of 25% rather than the standard capital gains rates.²³

Higher-income taxpayers should also account for the 3.8% net investment income tax on any recognized investment gain. It applies when modified adjusted gross income exceeds $200,000 for single filers or $250,000 for married couples filing jointly, and those thresholds are not adjusted for inflation.⁴ Combined with the top capital gains rate and state tax, the effective rate on recognized gain can be materially higher than the headline figure.

What You Need Before You Start the Form

Pull these records together first. The numbers on Form 8824 come directly from them.

Closing statements from both transactions. The HUD-1 or closing disclosure from each side gives you the sale price, purchase price, closing costs, and exact transfer dates.
Adjusted basis of the relinquished property: original purchase price, plus capital improvements, minus all depreciation you claimed or should have claimed.²
Fair market value of both properties, typically the contract prices.
The qualified intermediary’s final exchange agreement and accounting of funds received, held, and disbursed.
The signed written identification of replacement properties delivered within the 45-day window, along with the exact delivery date.

Depreciation history is where errors most often start. If you held a rental property for a decade, you need each year’s depreciation to arrive at the correct adjusted basis. Overstating basis understates the deferred gain, and the mistake surfaces later when you sell the replacement property.

Related-Party Exchanges

A related party for Section 1031 includes siblings, parents, children, grandchildren, a spouse, and entities you control such as a corporation or partnership in which you own more than 50%.⁵

If either party disposes of the property received within two years of the last transfer, the deferred gain snaps back and becomes taxable in the year of that disposition.⁵ Three narrow exceptions apply: death of either party, an involuntary conversion, or a showing to the IRS that neither the exchange nor the disposition was motivated by tax avoidance.

On Form 8824, Part II handles the disclosure. If you check “Yes” on line 7 and qualify for an exception on line 11, attach an explanation. Even if nothing changes, you continue filing Form 8824 each year until the two-year holding period expires.²

Attaching, Filing, and Keeping Records

Form 8824 is attached to the income tax return you file for the year the relinquished property was transferred: Form 1040 for individuals, or 1120, 1065, and so on for entities.¹ Electronic filing through IRS-approved software reduces transcription errors and confirms receipt. If you file on paper, certified mail with return receipt is legal proof of both mailing and delivery.⁶

One filing detail can shorten your exchange window. The 180-day period to complete the exchange ends on the earlier of 180 days after the transfer or the due date of your return with extensions. If your 180 days would run into May but your return is due April 15 without an extension, the exchange deadline becomes April 15. Filing a tax extension moves the alternative deadline to October 15 and preserves the full 180 days.⁷

Record retention for 1031 exchanges runs longer than for ordinary returns. General IRS guidance says three to seven years, but that assumes the transaction is closed.⁸ A 1031 carries the deferred gain into the basis of the replacement property. If you do a chain of exchanges over twenty years, you need the original records from the first exchange to calculate gain on the final sale. Keep closing statements, depreciation schedules, exchange agreements, and every filed Form 8824 for as long as you hold the replacement property, plus at least seven years after you finally sell it in a taxable transaction.

One Boundary Worth Knowing

Section 1031 applies only to real property held for business or investment use. Since January 1, 2018, the Tax Cuts and Jobs Act has excluded personal property such as equipment, vehicles, artwork, and intellectual property from like-kind treatment.⁹ Property held primarily for resale, such as a house you flipped, also does not qualify.⁵ If your transaction included any non-real-property assets, they are treated as taxable boot rather than like-kind property, and the gain flows through Form 8824 to Schedule D or Form 4797 the same way any other boot would.

1
Internal Revenue Service. About Form 8824, Like-Kind Exchanges
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IRS. 2025 Instructions for Form 8824
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Internal Revenue Service. Topic No. 409, Capital Gains and Losses
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Internal Revenue Service. Questions and Answers on the Net Investment Income Tax
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Office of the Law Revision Counsel. 26 USC 1031 – Exchange of Real Property Held for Productive Use or Investment
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USPS. Mailing Your Tax Return
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Internal Revenue Service. Like-Kind Exchanges Under IRC Section 1031
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Internal Revenue Service. How Long Should I Keep Records?
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Internal Revenue Service. Like-Kind Exchanges – Real Estate Tax Tips