Treasury Floats 1031 Exchange Limits—Should You Accelerate Your Like-Kind Deals?

New policy chatter could cap deferred gains at $400 K. Here’s the proposal, the political odds, and a step-by-step timeline to swap or refinance before the rules change.

1 | What’s on the Table?

Item Current Rule (2025) Treasury “Green Book” Proposal (May 2025)
Section 1031 Limit Unlimited deferral of capital-gain tax for like-kind real-estate exchanges Cap deferral at $400,000 total gain per taxpayer, per year
Implementation Date — January 1, 2026 (if enacted)
Status Requires Congressional approval Included in FY 2026 budget outline

Key Point: Nothing is law yet, but budget proposals often preview future tax-bill language—especially if aligned with revenue goals.

2 | Why a $400 K Cap Hurts Mid-Size Investors Most

  • Small Mom-and-Pop Sellers
    Gains below $400 K? Business as usual.

  • Institutional Funds
    Already use UPREITs, DSTs, or accelerated depreciation strategies; a cap merely tweaks deal structure.

  • Sweet-Spot Syndicators & Portfolio Builders
    Gains on a single apartment building or industrial condo sale frequently top $1 M. Partial deferral means up-front tax bills that can slash IRR 300–500 bps.

3 | Political Odds & Timing

Date Milestone Probability
Sept 2025 House Ways & Means markup 50 %—depends on deficit-offset priorities
Nov 2025 Election-year gridlock High—big tax changes often stall
Jan 2026 Cap effective (if passed) 30–40 % realistic odds

Takeaway: A one-year runway at minimum—but don’t bet on lame-duck compromise. Most sponsors are moving now to lock gains in 2025.

4 | Speed Sheet—How Long Does a 1031 Really Take?

Task Days Tips to Compress
Identify Replacement Property 0–30 Keep an “evergreen” wish list; use reverse exchange if inventory tight
Contract Negotiation 7–14 Include financing contingency windows < 10 days
Lender Term Sheet 2–3 (private) / 10+ (bank) Secure pre-approved DSCR or bridge before sale
Close Relinquished Property Day 0 of 45-Day ID Clock Arrange simultaneous closings to avoid reverse exchange
Close Replacement Property Typically Day 30–45 Use gap funding (bridge) if agency/CMBS timeline slips

Total: 60–90 days if everything lines up—so a deal started in August can close before Thanksgiving.

5 | Capital-Stack Options to Fast-Track Your Swap

Scenario Challenge LoanFunders.com Fix
Not enough equity until relinquished sale closes Down-payment gap Bridge-to-Agency Loan—80 % LTC, I/O, 12-mo term
Competing cash buyers Need certainty > bank letter DSCR “proof-of-funds” letter in < 24 hrs
Construction/Value-Add replacement Traditional lenders balk at timing/permits 80 % LTC renovation bridge + future DSCR refi
Multiple small assets roll-up Many closings, one loan Portfolio blanket DSCR—one mortgage over 5-10 doors

6 | Example—Multifamily Seller with $1.2 M Gain

Step Without Cap With Cap
1031 Deferral $1.2 M ↠ $0 taxable $400 K deferred; $800 K taxed
Fed/State Tax (24 % blended) $0 $192 K due at sale
Equity Rolled into New Deal $1.2 M $1.008 M
Leverage at 70 % LTV $2.8 M purchase $2.4 M purchase
Lost Buying Power — $400 K less asset value

A 192 K tax hit means choosing a smaller property—unless the investor sells and reinvests this year.

7 | Broker Playbook: Capture the Rush

  1. Flag High-Basis Clients—scan 2014-2018 purchases; gains likely > $400 K.

  2. Bundle Reverse-Exchange Partners—build a ready list of EAT (exchange accommodator titleholder) firms for inventory scarcity.

  3. Offer “1031 Express Quotes”—white-label LoanFunders.com DSCR & bridge term sheets in 24 hrs.

  4. Market a Countdown Calendar—email series: T-120, T-90, T-60, T-30 to push urgency.

  5. Highlight Partial-Defer Strategy—show clients how pref-equity + bridge covers extra taxes if full deferral impossible.

8 | Action Items for Investors

  • Run a Gain Estimate—CPA calc or online 1031 estimator.

  • Map Exit Windows—target property under contract by Labor Day 2025.

  • Collect DSCR Package—rent roll, T-12, insurance & tax quotes.

  • Engage an Intermediary Early—avoid day-of-closing panic.

  • Stay Election-Ready—rule could still stall; don’t assume.

9 | Key Takeaways

  • Treasury’s $400 K cap isn’t law yet, but risk-adjusted math favors swapping sooner.

  • 1031 timelines already push 60–90 days; a post-summer start risks 2026 spillover.

  • Private bridge + DSCR financing locks certainty faster than bank or agency pipelines.

  • Brokers who package rapid-close capital plus tax-law insights will own the client relationship through 2026.

Need “Cap-Proof” Financing?

LoanFunders.com issues 24-hour DSCR term sheets and 80 % LTV loans so you can list, contract, and close before any 1031 limit lands.

Accelerate the swap. Defer the tax. Preserve the buying power.