What are the 1031 exchange deadlines?

Two deadlines start the day the relinquished property closes: 45 calendar days to formally identify replacement property in writing to the qualified intermediary, and 180 calendar days to close on the replacement property (or the tax return due date including extensions, whichever is earlier). These deadlines include weekends and holidays and the IRS does not grant extensions.

What is the biggest mistake in a 1031 exchange?

Taking constructive receipt of the sale proceeds. If the money touches the seller's bank account, even briefly, the exchange fails. A qualified intermediary must be engaged before the sale closes so escrow wires proceeds directly to them. The second biggest mistake is beginning the search for replacement property only after closing, which wastes the 45-day identification window.

Can I 1031 exchange out of Hawaii into a mainland property?

Yes. All U.S. real property held for investment is like-kind to other U.S. investment real property, so a Maui condo can exchange into a mainland apartment building and vice versa. However, Hawaii has a clawback rule: the state tracks the deferred Hawaii-source gain and expects to collect it when the taxpayer eventually cashes out of the exchange chain. A CPA should be involved.

How does HARPTA affect a 1031 exchange in Hawaii?

HARPTA requires escrow to withhold 7.25% of the gross sale price when a non-resident sells Hawaii real property. In a properly structured 1031 exchange there is no recognized gain, so a non-resident exchanger should file Hawaii Form N-289 for a withholding exemption before closing. If this is not done in advance, 7.25% of the gross sale price can be tied up with the state while the 45-day and 180-day exchange clocks run.

What if I cannot find a replacement property within 45 days?

Options include identifying up to three properties under the 3-property rule to create backups, identifying a Delaware Statutory Trust (DST) as insurance because DSTs qualify as 1031 replacement property and can close quickly, or structuring a reverse exchange where the replacement is purchased before the relinquished property sells. A failed exchange means the full capital gains tax is due in the year of sale.

Can I 1031 into a property I later live in?

Yes, but only with time and structure. The replacement property must genuinely be acquired and held for investment. Rev. Proc. 2008-16 provides a safe harbor involving renting the property at market rate for a defined qualifying period and limiting personal use before converting it to a primary residence. Converting too quickly can invalidate the exchange.

Who do I need on my team for a Hawaii 1031 exchange?

A qualified intermediary engaged before closing, a CPA who understands Hawaii-source gain and the state clawback rule, and a real estate agent actively sourcing replacement property from day one rather than day forty. Mick St John, REALTOR® with Compass on Maui, runs 1031 exchanges regularly and coordinates the team: (808) 281-9530, mick@stjohnhawaii.com.

1031 Exchanges in Hawaii: Your Questions, Answered

Answers from Michael "Mick" St John, REALTOR® with Compass in Haiku, Maui (License RS-84410). 1031 exchanges are a core part of my practice. Last reviewed July 2026. This is general education, not tax or legal advice. Work with a qualified intermediary and your CPA.

What is a 1031 exchange, in plain English?

A 1031 exchange lets you sell an investment property and roll the entire proceeds into another investment property without paying capital gains tax at that moment. The tax is deferred, not erased. You keep the money working instead of sending 20% to 30% of your gain to the IRS and the State of Hawaii.

It is named for Section 1031 of the Internal Revenue Code. It applies to real property held for investment or business use. It does not apply to your primary residence, and it does not apply to property you bought to flip.

What are the 1031 deadlines?

Two hard clocks, both starting the day your relinquished property closes:

45 days to formally identify your replacement property or properties, in writing, to your qualified intermediary.
180 days to close on the replacement property (or your tax return due date including extensions, whichever comes first).

These are calendar days, they include weekends and holidays, and the IRS does not grant extensions for a bad market or a deal that fell through. Missing day 45 by one day ends the exchange.

What is the single biggest 1031 mistake?

Touching the money. If sale proceeds ever hit your bank account, even for a day, the exchange is dead. You must engage a qualified intermediary before your sale closes, and escrow wires the proceeds directly to them.

The second biggest mistake is starting the search for the replacement property after closing. By the time escrow funds, you have already burned zero of your 45 days but you have also done zero of the work. Sophisticated exchangers have replacement candidates lined up before they list.

Can I 1031 out of Hawaii, or into Hawaii, from another state?

Yes, both directions. All U.S. real property held for investment is "like-kind" to all other U.S. real property held for investment. A Kihei condo can exchange into a St. Louis apartment building. A Texas duplex can exchange into Upcountry Maui ag land held for investment.

Hawaii does have a clawback rule: if you exchange out of Hawaii property into out-of-state property, Hawaii still tracks the deferred Hawaii-source gain and expects to be paid when you eventually cash out. Your CPA needs to know about it. It does not stop the exchange, it just means Hawaii has not forgotten you.

How does HARPTA interact with a 1031 exchange?

This is the Hawaii-specific trap. HARPTA requires escrow to withhold 7.25% of the gross sale price when a non-resident sells Hawaii real property. In a properly structured 1031 exchange, you have no taxable gain to recognize, so that withholding is money that should not be leaving your exchange.

The fix is to file for a HARPTA withholding exemption (Form N-289) before closing, on the grounds that the transaction is a 1031 exchange with no recognized gain. Do this late and 7.25% of your gross sale price gets locked up with the state for months while your exchange clock is running. I have watched this blow up deals. It is entirely preventable.

What if I cannot find a replacement property in 45 days?

This is the most common panic on Maui, because our inventory is thin and 45 days is not long. Options:

Identify up to three properties regardless of value (the 3-property rule), which gives you backups.
Use a DST (Delaware Statutory Trust), a fractional interest in institutional real estate that qualifies as 1031 replacement property and can typically close in days. Many exchangers identify a DST as a backup on day 45 purely as insurance.
Reverse exchange, where you buy the replacement first and sell after. More expensive and more complex, but it eliminates the clock entirely.

Failing the exchange means paying the full tax bill in the year of sale. The cost of planning is always less than the cost of that.

Can I 1031 into a property I eventually want to live in?

Sometimes, with patience and structure. The replacement property must genuinely be held for investment at acquisition. There is a safe-harbor pattern (Rev. Proc. 2008-16) involving renting it at market rate for a defined period and limiting your own personal use before converting it to a primary residence. Rush it and the IRS will treat the exchange as invalid.

This is a real strategy for people who want to eventually retire onto Maui. It just has to be built years out, not months out.

Does a Maui short-term rental condo still work as 1031 property?

As relinquished property, yes, and a lot of Minatoya-list owners are looking at exactly this move as the Bill 9 phase-out deadlines approach. As replacement property, be careful: you are exchanging into an asset whose income use has a legislated end date, and lenders and appraisers know it. See our Bill 9 FAQ.

Who do I need on my team for a Hawaii 1031?

A qualified intermediary, engaged before closing.
A CPA who understands Hawaii-source gain and the clawback rule.
A real estate agent who is sourcing replacement property from day one, not day 40.

I run 1031s regularly and I coordinate the whole team so the clock never catches you. Start the conversation before you list: (808) 281-9530 or mick@stjohnhawaii.com.