1031 Exchanges that Split Between Tax Years

As we enter 2026, many taxpayers will have their 1031 Exchanges that started in 2025 but will not conclude until 2026. This situation can bring up questions that need to be addressed with your tax professional.

When Do You Report Your 1031 Exchange?

Your transaction should be reported on your Federal tax return for the year in which your exchange began. If you sold your property in 2025 and you acquired your replacement property in 2026, your exchange would be reported on your 2025 tax return.

What If You Have a Failed Exchange or Boot?

If your exchange were to fail in 2026 or if you receive boot from your exchange in 2026, you may be able to report that gain under the installment sale provision under Section 453 of the tax code. There are various exceptions for installment sales, so please consult with your tax professional before assuming this course of action.

For additional information on reporting your exchange, please reach out to your tax professional or contact the specialists here at Security 1st Exchange for assistance.