New Mexico 1031 like-kind exchanges defer capital gains tax on real-estate sales when proceeds reinvest in similar property — strict 45/180-day deadlines + qualified intermediary required.
Published May 9, 2026
## 1031 like-kind exchanges in New Mexico
**Section 1031** of the Internal Revenue Code allows real-estate investors to defer capital gains tax by reinvesting sale proceeds in "like-kind" property. New Mexico investors use 1031 exchanges to grow portfolios + delay tax indefinitely.
## The basic concept
**Without 1031:**
- Sell investment property
- Pay capital gains tax (federal + state)
- Pay depreciation recapture
- Invest remaining net
**With 1031:**
- Sell investment property
- Reinvest gross proceeds in like-kind property
- Defer all capital gains + recapture taxes
- Use full proceeds for new investment
- Continue deferring through subsequent exchanges
- Step-up in basis at death (estate planning)
## Tax savings
**Federal tax rates (2025):**
- Long-term capital gains: 0%, 15%, 20%
- Plus 3.8% NIIT
- Depreciation recapture: 25%
- State tax: varies (${s.name} specific)
**Combined often 25-40%+ of gain.**
**Tax deferral effective interest:**
- Tax-deferred investment compounds
- Like interest-free loan from government
- Significant long-term advantage
## Qualifying property
**"Like-kind" definition (post-TCJA 2017):**
- Real estate ONLY
- Held for investment / business use
- Not personal residence
- Not flip property ("holding for sale")
- Not inventory
- US property + US property (cannot mix US + foreign)
**Like-kind interpretation:**
- Most real estate qualifies as like-kind to other real estate
- Apartment complex ↔ office building ↔ farmland ↔ raw land
- Long-term lease (30+ years) treated as real estate
- Specific to circumstances
**No longer qualifies (post-TCJA):**
- Personal property
- Equipment
- Vehicles
- Aircraft
- Specific tangible property
- Major change from pre-2018
## Property timing requirements
**STRICT deadlines (no extensions):**
**45-day identification period:**
- 45 days from sale of relinquished property
- Identify replacement property in writing
- Specific identification rules:
- 3-property rule (any 3 properties)
- 200% rule (any number, total FMV ≤ 200% relinquished)
- 95% rule (any number, must acquire 95%)
**180-day exchange period:**
- 180 days from sale of relinquished property
- Acquire replacement property
- Includes 45-day identification within
- OR tax return due date if earlier
- Cannot be extended
**These are calendar days, not business days.**
## Qualified intermediary (QI) requirement
**Critical:**
- Must use qualified intermediary
- QI holds proceeds during exchange
- Cannot have actual / constructive receipt
- Specific QI requirements
- Specific procedures
**QI cannot be:**
- Your CPA / attorney (recent or current)
- Family member
- Employee
- Specific disqualified persons
**QI services:**
- Hold sale proceeds
- Coordinate exchange
- Document compliance
- Specific fee structure
- Specific bonded protection
## Process
**1. Plan exchange BEFORE selling:**
- Engage QI
- Specific exchange documents
- Specific contract provisions
- Specific timing analysis
**2. Sale of relinquished property:**
- Standard real-estate sale
- Proceeds to QI (not seller)
- Specific exchange language in contract
- Specific assignment of rights
**3. Identification of replacement (45 days):**
- Written identification
- Specific rules followed
- Sent to QI
- Specific deadlines
**4. Acquisition of replacement (180 days):**
- Standard purchase + close
- QI funds purchase
- Specific assignment of rights
- Specific exchange language
**5. Tax reporting:**
- Form 8824
- Filed with tax return
- Specific calculations
- Specific procedures
## Boot — the catch
**"Boot" = non-like-kind value received:**
- Cash received (not invested)
- Mortgage relief (debt of relinquished > replacement)
- Personal property received
- Specific other amounts
**Tax consequences:**
- Boot is taxable
- Up to amount of gain
- Reduces deferral benefit
- Specific to amount + type
**Avoiding boot:**
- Reinvest all proceeds
- Equal or greater value of replacement
- Equal or greater debt on replacement
- Specific structures
## Common types of 1031 exchanges
**Forward exchange (most common):**
- Sell first, then buy
- Standard timeline
- 45/180 day rules apply
**Reverse exchange:**
- Buy first, then sell
- More complex
- Different deadlines
- Specific accommodation party
- Higher cost
**Construction exchange:**
- Building improvements
- Specific procedures
- 180-day timing critical
- Specific cost considerations
**Build-to-suit exchange:**
- Construction on replacement property
- During exchange period
- Specific procedures
- Higher complexity
## Recent issues + considerations
**TCJA 2017 changes:**
- Personal property no longer qualifies
- Real estate only now
- Major change
**Proposed legislative changes:**
- Periodic threats to limit / eliminate
- Cap on gains deferrable
- Specific to political environment
- Always check current law
**Current uncertainty:**
- Tax reform discussions
- Specific to political administration
- Strategic timing considerations
## Common mistakes
**Procedural:**
- Missing 45-day deadline
- Missing 180-day deadline
- Improper identification
- Receipt of proceeds (constructive)
- Inadequate QI selection
- Specific document errors
**Strategic:**
- Inadequate replacement properties identified
- Property fall-throughs
- Inadequate due diligence
- Cost considerations
- Specific economics
**Tax:**
- Forgetting boot
- Inadequate reporting
- Specific entity issues
- Specific basis tracking
- ${s.name} state tax issues
## Costs
**Typical exchange costs:**
- QI fees: $750-$2,000+
- Attorney fees: $500-$3,000
- Specific expenses
- Total typical: $2,000-$5,000
**Worth it for:**
- $50K+ in deferred tax
- Strategic portfolio building
- Long-term tax planning
## Strategic considerations
**Estate planning:**
- Step-up in basis at death
- Eliminates deferred tax
- Heirs receive at FMV basis
- Significant generational benefit
**Multiple exchanges:**
- Continue deferring
- Build portfolio
- Reinvest gains
- Long-term strategy
**Specific scenarios:**
- Cash-out refinance vs sale
- Specific tax timing
- Specific market conditions
- Specific portfolio strategy
## Same taxpayer requirement
**Critical:**
- Same taxpayer holds both properties
- Specific entity requirements
- LLC + entity considerations
- Specific to ownership structure
- Strategic planning needed
## ${s.name} state tax
**State conformity:**
- Most states follow federal 1031
- ${s.name} specific conformity
- Specific state tax rates
- ${s.name} reporting requirements
**Some states impose:**
- Withholding on sales
- Non-resident withholding
- Specific procedures
- ${s.name} specific rules
## Vacation property + 1031
**Limited use:**
- Generally personal use disqualifies
- Specific safe harbor (Rev. Proc. 2008-16):
- Held 24+ months
- Rented 14+ days/year at FMV
- Personal use ≤ 14 days OR 10% of rental days
- Specific to circumstances
## When NOT to use 1031
**Sometimes selling outright better:**
- Limited gains anyway
- Cash needed for purposes other than reinvestment
- Different investment direction
- Specific tax circumstances
- Estate basis step-up unavailable
- Specific portfolio strategy
## What you should do
If you're considering a 1031 exchange in New Mexico: PLAN BEFORE SELLING — exchange must be in place at sale closing. Engage qualified intermediary, real-estate attorney, + tax advisor early. Most New Mexico real-estate attorneys handle 1031 exchanges. QI fees + attorney fees small relative to tax savings. Strict deadlines unforgiving.
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*This guide is general information about federal + New Mexico law as of mid-2026 and is not legal or tax advice. 1031 exchanges are technical + time-sensitive. Talk to a licensed New Mexico real-estate attorney + tax advisor about your specific situation.*
This guide is for general information only and does not constitute legal advice. Laws change and outcomes depend on your specific situation — talk to a licensed attorney before acting on anything you read here.