Want to roll the proceeds from a sale into a Dunnellon investment without triggering a big tax bill today? A 1031 exchange can help you defer federal capital gains and keep more money working for you. If you are eyeing rentals, small acreage, or land in Dunnellon, timing and structure matter more than ever in a smaller market. This guide breaks down the rules, local costs, and smart strategies so you can execute with confidence. Let’s dive in.
What a 1031 exchange does
A 1031 exchange lets you sell investment or business real estate and reinvest the proceeds into like-kind U.S. real property, deferring federal capital gains and depreciation recapture. The property must be held for investment or business use, not for personal use. After 2017, only real property qualifies.
You report the exchange on your tax return using IRS Form 8824 instructions. The rules cover timing, identification, qualified intermediaries, and related-party limits.
Key 1031 deadlines you must hit
- Identification deadline: You have 45 calendar days after you close on the sale of your old property to identify potential replacements in writing.
- Exchange deadline: You must close on the replacement property by the earlier of 180 days from your sale or your tax return due date, including extensions.
Miss either date and the exchange fails. These clocks run at the same time, so plan your search early.
How identification works
The IRS allows three main methods to identify replacement property:
- Three-property rule: Identify up to three properties, any value.
- 200% rule: Identify any number of properties as long as total value is no more than 200% of what you sold.
- 95% rule: Identify any number or value, but you must acquire 95% of the total identified.
Submit your list in writing by day 45 with clear addresses or legal descriptions. For a quick refresher on these options, review this identification rules overview.
Dunnellon market reality and strategy
Dunnellon is a smaller market with fewer active listings than big metros. That can make the 45-day identification window feel tight. To keep your exchange on track:
- Identify multiple options using the three-property or 200% rule so you are not stuck if one deal falls through.
- Start due diligence fast so you can pivot if inspections or financing change your plan.
- Consider a reverse exchange if you must secure a specific Dunnellon property before your sale closes.
The role of a Qualified Intermediary (QI)
In a delayed exchange, you cannot take possession of sale proceeds. A QI holds the funds and sends them to the closing agent when you buy the replacement property. Work with your QI early so closing instructions, title, and lender timelines align with the exchange requirements.
Florida and Marion County costs to budget
- State income tax: Florida does not impose a personal state income tax, so there is no separate Florida capital gains tax for most individuals. See the Florida Constitution.
- Documentary stamp tax on deeds: Most Florida counties assess doc stamps at $0.70 per $100 of consideration. Mortgages typically incur additional doc stamps and intangible tax. Review the statute summary for details on rates in Florida’s excise tax law.
- Recording fees: Marion County charges standard recording fees that vary by document length. Typical examples include a first page fee and reduced fees for each additional page. Confirm current costs with the county; a good starting point is the Marion County recorder page.
- Who pays doc stamps: In Florida, sellers commonly pay documentary stamps, but the contract controls. Coordinate with the title company and your QI so funds and documents are handled correctly. See a process example under recording deed requirements.
Financing and avoiding taxable “boot”
To fully defer tax, you generally need to buy equal or greater value and replace equal or greater debt. If you reduce your mortgage on the replacement without adding cash, the debt relief can be taxable boot. Any leftover cash you receive is also boot. Plan your loan terms early and coordinate with your QI and lender.
Depreciation you claimed on the relinquished property is not erased. It carries into your replacement property’s basis and is deferred. For a simple explanation of how recapture deferral works, see this depreciation recapture overview.
Special cases: reverse, improvements, and rentals
- Reverse and improvement exchanges: If you need to buy before you sell, or you plan to build improvements, the IRS provides a safe-harbor structure that uses an accommodation titleholder. These are more complex and time-bound. Learn the framework from Rev. Proc. 2000-37 safe-harbor guidance.
- Vacation homes and conversions: If you exchange into a dwelling you will rent and later convert to personal use, follow the rental-use and limited personal-use tests in Rev. Proc. 2008-16 to demonstrate investment intent.
- Fractional options: Some investors use Delaware Statutory Trusts or certain TIC structures to meet deadlines. IRS treatment is described in Rev. Rul. 2004-86. Review offering documents carefully and discuss risks with your advisors.
Your step-by-step plan
Map your exchange before listing. Talk with your CPA and decide on a delayed, reverse, or improvement exchange. Review the Form 8824 instructions for timing and reporting.
Engage a Qualified Intermediary before your sale closes. Make sure your title company routes proceeds to the QI.
Start your Dunnellon search early. Line up several properties that match your investment goals and fit the identification rules.
Identify by day 45. Use clear addresses or legal descriptions and the three-property or 200% rule. Submit the list in writing to your QI.
Lock financing and complete due diligence. If your replacement debt will be lower, be ready to add cash to avoid mortgage boot.
Budget closing costs. Confirm documentary stamp taxes and Marion County recording fees with your title company, using the Marion County recorder reference as a starting point.
Close by day 180. Ensure closing statements and title reflect the exchange, with funds coming from the QI. File Form 8824 with your tax return for that year.
Close with confidence in Dunnellon
A well-planned 1031 exchange can keep your capital compounding while you add a Dunnellon rental, land, or small acreage to your portfolio. The keys are early planning, tight identification, and precise closing coordination. If you want a local, high-touch guide to help you scout properties and keep timelines on track, reach out to Jess Stone. We will make the process feel clear, timely, and tailored to your goals.
FAQs
Can I use a 1031 exchange to buy a primary residence in Dunnellon?
- No. A 1031 exchange is for property held for investment or business use; converting to personal use later has special rules under Rev. Proc. 2008-16.
What are the 1031 exchange deadlines I must meet when buying in Dunnellon?
- You have 45 days to identify replacement properties and 180 days to close, measured from the sale closing date or earlier tax return due date per Form 8824 instructions.
What closing costs should I expect in Marion County for a 1031 purchase?
- Budget for Florida documentary stamp tax on deeds, potential mortgage doc stamps and intangible tax, plus Marion County recording fees; see the statute overview and local references at Florida excise tax law and the Marion recorder page.
How do I avoid taxable boot if my replacement loan is smaller?
- Replace your prior debt with equal or greater debt, or add cash equal to the reduction; otherwise, the debt relief can be taxable boot under 1031 rules.
Can I buy a Dunnellon property before I sell mine and still complete a 1031 exchange?
- Possibly, using a reverse exchange safe harbor that parks title with an accommodation party; see the framework in Rev. Proc. 2000-37.
