1031 Exchanges Now Recognized Across All 50 States

Section 1031 of the federal tax code has allowed taxpayers the ability to defer their federal capital gains since its passage in 1921. Up to this point, the Commonwealth of Pennsylvania has not recognized the 1031 Exchange to allow for the deferral of their state tax liabilities when selling real property held for investment purposes. As of January 1, 2023, Pennsylvania will now allow for their state tax deferral through the 1031 Exchange.

Governor Tom Wolf signed House Bill 1342 on July 8, 2022, which includes a provision that aligns the state’s recognition of the 1031 code with the federal government’s. The new law allows both residents and non-resident property owners in the state of Pennsylvania to take the full advantage of the 1031 Exchange. This new law applies to both individuals and partnerships and goes into effect for all exchanges that occur starting January 1, 2023. Taxpayers closing on property in 2022 cannot receive this tax treatment.

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