1031 Exchange

Seller Heidi Dollinger October 27, 2023

A 1031 tax-deferred exchange is a way to defer capital gains taxes owed by reinvesting in another investment property. (Section 1031 of the United States Internal Revenue Service’s tax code.) For a full deferral on capital gains, the exchanger must reinvest all the exchange proceeds (the sales price). If there is debt on the property being sold, the exchanger must acquire equal debt on the replacement property or reinvest additional cash equal to the debt relief. A 1031 exchange can be done to exchange out of a property anywhere in the US and buy in Hawaii, or you can sell a Hawaii investment property and exchange into a different investment property anywhere in the US. 
If you are contemplating a 1031 exchange, be aware that you will need to set this up prior to closing. The funds from the sale of your relinquished property need to go directly to your 1031 exchange accommodator (also known as a qualified intermediary) and must be held there until you buy your replacement property. 
Basic timelines for a traditional 1031 exchange: 
Once your relinquished property closes you have 45 days to identify your replacement properties. You have 180 days from the day of closing on your relinquished property to close on one of your replacement properties. 
A 1031 exchange applies to investment properties only. You cannot exchange into a personal residence or sell a personal residence to enact a 1031 exchange, though many different types of investment properties do apply. For example, you can exchange a commercial property into a rental home or condominium or into multiple rental homes or condominiums or land. Consult your tax professional and/or your 1031 exchange accommodator for more details. 
Another strategy often used in fast-moving markets is a Reverse 1031 exchange which allows you to buy a replacement property first and then sell the relinquished property later.
If you are selling a Hawaii property and electing to enact a 1031 exchange with 100% of the proceeds, your sale will not be subject to a HARPTA withholding at closing. (HARPTA is the 7.25% tax withholding at closing for sellers who are not residents of the state of Hawaii.)

First - Consult With Your Tax Professional and/or Financial Planner to See if a 1031 Exchange is Right for You.

If electing to enact a 1031 exchange, you will need to use a 1031 exchange accommodator (also known as a qualified intermediary) to complete your exchange.
Here are a couple of resources for 1031 exchange:

Old Republic Exchange

Julie Bratton

Vice President/ Regional Sales Executive 


[email protected] 

Old Republic Exchange

IPX – 1031 Exchange 

Tiffany Davies 

Vice President/ Regional Account Executive 

201 Merchant St., Suite 2100, Honolulu, HI 96731



[email protected]


Let me know if I can help you with your plans for your next 1031 exchange to buy or sell in Hawaii.  

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