Can You 1031 Exchange into a REIT?

No, you can't, but two other REIT-like alternatives let you defer capital gains taxes while giving you exposure to institutional-quality real estate assets.

An apartment building on a sunny day.
(Image credit: Getty Images)

One of the most common questions among real estate investors: Can I complete a 1031 (like-kind) exchange by rolling capital gains from an investment property into purchasing shares of a real estate investment trust (REIT)?

Directly exchanging into a REIT does not qualify for tax deferral under IRS rules, for reasons we’ll explore below. However, two compelling alternative vehicles exist that check many of the same boxes that REITs do, allowing investors to still delay tax obligations while accessing exposure to institutional-quality real estate assets.

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Daniel Goodwin
Chief Investment Strategist, Provident Wealth Advisors

Daniel Goodwin is a Kiplinger's contributor on various financial planning topics and has also been featured in U.S. News and World Report, FOX 26 News, Business Management Daily and BankRate Inc. He is the author of the book Live Smart - Retire Rich and is the Masterclass Instructor of a 1031 DST Masterclass at Daniel regularly gives back to his community by serving as a mentor at the Sam Houston State University College of Business. He is the Chief Investment Strategist at Provident Wealth Advisors, a Registered Investment Advisory firm in The Woodlands, Texas. Daniel's professional licenses include Series 65, 6, 63 and 22. Daniel’s gift is making the complex simple and encouraging families to take actionable steps today to pursue their financial goals of tomorrow.