Thinking about selling one investment property and buying in Oakhurst while deferring taxes? You are not alone. Many owners look to Savannah’s historic neighborhoods for steady rental demand and character-rich buildings, but the tax rules can feel confusing. This guide breaks down the 1031 exchange basics in plain English, highlights Oakhurst-specific considerations, and gives you a simple step-by-step example so you can plan with confidence. Let’s dive in.
What a 1031 exchange is
A 1031 exchange lets you defer federal capital gains tax when you sell real property held for investment or business use and reinvest into other like-kind real property. “Like-kind” is broad for real estate held for investment, which means you can exchange a rental house for a small multifamily, a mixed-use building, or another investment property. Since 2018, only real property qualifies. Personal property does not qualify under current federal law.
The tax rules require that the taxpayer who sells is generally the same taxpayer who buys the replacement property. Individuals, partnerships, LLCs, and corporations can all use 1031, but the title and taxpayer identity need to match correctly. You should review your structure with a qualified tax advisor before you list or write offers.
Why consider Oakhurst, Savannah
Oakhurst sits within Savannah’s historic fabric and offers a mix of single-family rentals, small multifamily buildings, and smaller commercial or mixed-use properties. Those options can fit a range of exchange goals and price points. Because local zoning and historic-district rules can affect renovations and use, you will want to confirm feasibility early so your plan fits the 1031 timeline.
The 45-day and 180-day deadlines
Two strict clocks start on the day you close the sale of your relinquished property:
- Identification period: You have 45 calendar days to identify replacement property in writing. Your identification must be specific and delivered to the right party.
- Exchange period: You have 180 calendar days to complete the purchase of the replacement property. The 180 days run at the same time as the 45 days, not after.
These are hard deadlines measured in calendar days. Missing either one typically disqualifies the exchange and triggers tax on the sale. Calendar reminders, a clear search plan, and tight contract timelines make a big difference.
Use a Qualified Intermediary
To protect your exchange, sale proceeds cannot come to you directly. A Qualified Intermediary (QI) must hold the funds and coordinate the transfer into the replacement property. If you or your entity receive or control the proceeds, the IRS can treat it as a taxable sale.
QIs are not regulated by the IRS, so vet your intermediary carefully. Ask about experience with Georgia closings, insurance and bonding, reverse or improvement exchange capabilities, and best-practice standards. Your QI should be involved before you list and before you sign a purchase contract on the replacement property.
How to identify replacement property
Your identification must be signed, in writing, and delivered within 45 days. It needs to unambiguously describe the property by street address or legal description. You can use one of three rules:
- Three-Property Rule: Identify up to three properties without regard to value.
- 200 Percent Rule: Identify any number of properties as long as the total fair market value does not exceed 200 percent of the value of what you sold.
- 95 Percent Exception: If you identify more than allowed under the first two rules, you must close on 95 percent or more of the total identified value.
In Oakhurst, you might identify a few options across single-family rentals, a small duplex or quad, and possibly a small mixed-use building. The 200 percent rule can give you flexibility if your sale price is modest and you want multiple targets in the same neighborhood.
Value, debt, and avoiding boot
To fully defer tax, aim to buy equal or greater value and reinvest all net proceeds. If you receive cash or non–like-kind property, that is considered boot and can be taxable to the extent of your gain. Mortgage differences matter too. If your replacement property has less debt than the property you sold, that debt reduction can also be treated as boot unless you add cash to make up the difference.
Depreciation recapture is generally deferred in a proper like-kind exchange, but any boot can trigger immediate recognition. Plan your value, debt, and cash contributions with your CPA and QI early.
Title and taxpayer name must match
The replacement property should be acquired in the same name as the seller of the relinquished property. If you plan to use an LLC, a trust, or a single-member LLC, discuss the details with your tax and legal advisors so vesting lines up with 1031 requirements.
Related-party and control pitfalls
Avoid structures that give you control of the cash. Constructive receipt or improper escrow access can sink the exchange. Be careful with related-party transactions as well. If you or a related party dispose of the property within two years, the IRS can unwind the deferral. Holding periods and clean, arms-length documentation are essential.
Reverse and improvement exchanges
Sometimes you want to secure the Oakhurst property before selling your current asset. A reverse exchange can help by having an accommodation titleholder hold the new property while you complete your sale. Reverse exchanges are more complex and usually more expensive, and the 180-day window still applies.
If the Oakhurst property needs upgrades to meet your investment plan, an improvement exchange can use exchange funds for renovations within the 180-day period. These structures require careful planning, strict documentation, and realistic construction timelines.
Local notes for Oakhurst and Chatham County
- Historic and zoning approvals: Oakhurst properties may be subject to City of Savannah historic review and zoning rules. Permits and approvals do not pause the 45 or 180 days. Build extra time into your plan or consider a reverse or improvement exchange if approvals are likely.
- Recording and transfer costs: Georgia recording fees and related closing costs will affect your net proceeds and exchange math. Chatham County records deeds locally, so coordinate with a title company that understands exchange language and timing.
- Georgia tax treatment: Many states follow federal 1031 rules, but filings and conformity can change. Confirm current Georgia requirements with a Georgia tax professional or the Georgia Department of Revenue.
- Local team: Use a Georgia-experienced CPA or tax attorney, a real estate attorney licensed in Georgia, a QI comfortable with Chatham County closings, and a title company that has handled exchanges in Savannah.
A simple Oakhurst exchange timeline
Below is an illustrative scenario to show how timing works. This is not tax advice, but it will help you visualize the steps.
- Day 0: You close the sale of your relinquished investment property. The proceeds go directly to your QI. The 45-day and 180-day clocks start now.
- Days 1–30: You and your agent evaluate Oakhurst options. You inspect property data, confirm zoning or historic constraints, and watch contract dates closely.
- By Day 45: You deliver written identification of up to three Oakhurst properties to your QI, each one clearly described by address and legal description.
- Days 30–120: You negotiate and go under contract on one identified property. You confirm the closing date fits within 180 days. Your contract includes exchange-friendly language.
- By Day 150: You close on the replacement property. The QI wires exchange funds, and title vests in the same taxpayer name. You reinvest all net proceeds and match or exceed your prior value and debt to avoid boot.
- After closing: You or your preparer report the exchange on your federal return for the year of the sale, including Form 8824, and keep all exchange records.
Key checkpoints to keep in mind:
- Have the QI and exchange agreement in place before listing your sale.
- Use calendar reminders for Day 45 and Day 180, and share them with your lender, attorney, and title company.
- Identify precisely and on time. Ambiguity can invalidate your identification.
- If approvals or improvements are required, consider whether a reverse or improvement exchange is a better fit, and budget for added costs.
- Avoid related-party complications or have your advisors structure and document a compliant plan with an appropriate holding period.
Common mistakes to avoid
- Missing the 45-day or 180-day deadlines. Set alerts and build a realistic search and contract timeline.
- Choosing an inexperienced QI. Verify references, insurance, and Georgia closing experience.
- Touching the proceeds. Keep funds with the QI to avoid constructive receipt.
- Mismatched title or taxpayer identity. Align entity names early with your attorney and CPA.
- Underestimating closing and improvement costs. Factor in QI fees, attorney fees, title insurance, recording fees, and any Savannah historic or zoning-related costs.
Getting started the right way
If you are eyeing Oakhurst for your replacement property, start conversations early. Talk with a Georgia-savvy CPA or tax attorney about your goals, debt, and entity structure. Select a Qualified Intermediary before you list or write offers. Then create a search plan that accounts for the 45-day identification window and the 180-day closing deadline. With the right team and a realistic timeline, you can make a smart move into Oakhurst while deferring tax.
Ready to map out a 1031 strategy and explore Oakhurst options that fit your budget and timeline? Reach out for calm, practical guidance and a clear next step. Contact Unknown Company to schedule a free consultation.
FAQs
Can I use my primary residence in a 1031 exchange?
- Generally no. 1031 applies to property held for investment or business use, and only the rental or business portion of a mixed-use property might qualify.
Do my replacement properties have to be in Georgia?
- No. Like-kind exchanges allow U.S. investment real property for other U.S. investment real property, but plan for any state-specific filings or taxes.
What happens if I miss the 45-day or 180-day deadline?
- Missing either deadline usually disqualifies the exchange and triggers tax on the sale, which is why planning and reminders are essential.
How does mortgage debt factor into a 1031 exchange?
- If your replacement debt is lower than the debt on the property you sold, the difference can be taxable boot unless you add cash to make up the shortfall.
How long should I hold the replacement property?
- There is no set federal holding period, but the property must be held for investment. Short-term flips can draw IRS scrutiny, and related-party rules add a two-year concern.
Do I need Georgia-based professionals for an Oakhurst exchange?
- Yes. Use a QI experienced with Georgia closings, a Georgia real estate attorney, a tax advisor familiar with state rules, and a title company that understands exchange mechanics.
