Can I Perform a Partial 1031 Exchange?

If you're exploring the benefits of a 1031 exchange, you may be wondering—can I perform a partial 1031 exchange? The short answer is yes, but there are a few key details to understand before moving forward.

What Is a Partial 1031 Exchange?

A partial 1031 exchange occurs when you reinvest only a portion of your proceeds from the sale of a relinquished property into a new like-kind investment property. The remaining amount—often referred to as “boot”—is not reinvested and may be subject to capital gains tax.

While a full 1031 exchange offers the maximum tax deferral benefits, a partial exchange can still provide significant advantages for investors who want flexibility with their funds.

How It Works

In a typical 1031 exchange, you must reinvest 100% of both the sales price and equity into a new property (or properties) to fully defer your capital gains tax. But with a partial exchange, you choose to reinvest less than the total proceeds, and you pay taxes only on the portion you keep out. This can be beneficial if you want to:

• Free up cash for other investments

• Pay down debt

• Cover personal expenses

• Diversify your investment strategy

What to Consider

While a partial 1031 exchange is a legal and accepted option, there are a few things to keep in mind:

• Boot is taxable: Any amount not reinvested is considered taxable gain.

• Timing still matters: You must still follow the same deadlines—identify replacement property within 45 days and close within 180 days.

• Like-kind rules apply: Even for a partial exchange, both properties must qualify as like-kind under IRS guidelines (used for business or investment purposes).

Is a Partial 1031 Exchange Right for You?

Partial exchanges can be a smart strategy for investors seeking flexibility, but the decision depends on your financial goals and tax situation. The best next step? Talk to a 1031 exchange expert who can guide you through your options and help structure your exchange to maximize benefits.

Let’s Talk Strategy

At APX 1031, we help investors like you navigate the 1031 exchange process with confidence. Whether you're looking to fully defer taxes or explore a partial exchange for added liquidity, our team is here to make sure your next move is the right one.

Contact us today to learn more about how a partial 1031 exchange can fit into your investment strategy.