A 1031 exchange lets investors sell a property and buy another similar one without paying taxes immediately. Here's how it works:

Similar Properties - You can only swap for properties that are similar, like trading real estate for real estate.

Timing - After selling, you have 45 days to choose a replacement property and 180 days to finish the exchange.

Qualified Intermediary - You'll work with a middleman to handle the money from the sale and use it to buy the new property.

No Cash or Boot - You can't get cash or other non-property items in the exchange, or you might owe taxes on it.

Equal or Greater Value - The new property must be worth as much or more than the old one to avoid paying taxes.

Definition of Like-Kind - Real estate can be traded for different types of real estate, like houses for apartments.

Personal Residences - You can't use this for your own home, just for investment properties.

Tax Deferral - You delay paying taxes until you sell the new property, but eventually, you may owe taxes if you sell it for a profit.