An estimated 100,000 to 200,000 or more 1031 exchanges happen in the U.S. each year, involving hundreds of billions of dollars in real estate. They are used by individual investors, small businesses, and large institutions alike, and the available data points to their role in supporting real estate investment and job creation.
Annual exchange volume
Somewhere between 100,000 and 200,000 or more property owners complete a 1031 exchange in a typical year, and the count runs higher when small transactions are included. The real estate changing hands is worth anywhere from $100 billion to more than $300 billion. A 1031 exchange, named for the section of the tax code that permits it, lets an investor sell one investment property and roll the proceeds into another while deferring the capital gains tax.
Those ranges are wide for a plain reason: nobody counts exchanges directly. They aren't reported to any central database. The IRS gathers the relevant paperwork through Form 8824, but publication lags and the slow work of aggregating it make real-time tracking impossible.
What we can see comes from the people who handle exchanges for a living. The Federation of Exchange Accommodators, whose members are the qualified intermediaries that hold the sale proceeds between the two legs of a deal, periodically surveys its membership. Its data suggests exchange activity moves in step with the broader property market, rising in strong years and dipping in downturns. The history bears that out: volume peaked during the 2005-2007 boom, fell sharply from 2008 to 2011, recovered through the 2010s, and has held up through the 2020s.
Who uses 1031 exchanges
1031 exchanges are sometimes described as a loophole for the wealthy. The people who actually use them look more ordinary than that.
Ernst & Young research updated in 2022 put the median adjusted gross income of exchange participants at about $132,000, well below any ultra-wealthy line. The typical exchanger is a small-scale investor: someone who owns a rental property or two, has held it for years, and wants to reinvest the proceeds without handing a chunk to the tax collector first. Think teachers, engineers, small business owners, and retirees.
By count, residential rentals - single-family homes and small multifamily buildings - make up the largest share of exchanges. By value, commercial properties do.
Businesses use the same tool for property they operate out of. A dentist moving to a larger office, a manufacturer trading up to a bigger warehouse, a farmer consolidating parcels: these are working exchanges, not speculation.
Average transaction size
Exchange sizes vary enormously, from small rental swaps to institutional deals. The table also lists DST exchanges, where an investor buys a fractional stake in larger property through a Delaware Statutory Trust. Rough averages:
Category | Estimated average |
|---|---|
All 1031 exchanges | $500,000 - $1,000,000 in property value |
Residential rental exchanges | $300,000 - $700,000 |
Commercial exchanges | $1,000,000 - $5,000,000+ |
DST exchanges | $100,000 - $500,000 per investor |
Farmland/agricultural | $500,000 - $3,000,000 |
Individual deals run from under $200,000 to hundreds of millions.
Economic impact
A 2022 Ernst & Young study commissioned by the National Association of Realtors and other real estate groups estimated that 1031 exchanges supported about 976,000 jobs and added $97.4 billion to U.S. GDP in 2021. An earlier NAR estimate had put the job figure closer to 568,000; the updated methodology captured a wider set of economic links.
The mechanism behind those numbers is capital that keeps moving. When an owner exchanges instead of selling outright, the money stays invested in real estate rather than going to taxes, which speeds up how often properties turn over, get improved, and get built. Exchangers frequently trade into properties that need work, and deferring the tax removes some of the drag on paying for it.
The cost to the Treasury is real but easy to misread. The Joint Committee on Taxation, Congress's tax scorekeeper, now shows a combined federal tax expenditure - revenue the government forgoes - for like-kind exchanges that is larger than older estimates, reflecting updated modeling of chained deferrals and stepped-up basis at death, the rule that resets a property's taxable value for heirs and can erase the deferred gain for good. The precise figure shifts with each JCT publication and method. In principle it remains a timing difference: the tax is deferred, not eliminated, and comes due when the property is eventually sold without another exchange, unless stepped-up basis at death wipes it out.
Exchanges also spin off other public revenue along the way: transfer taxes, recording fees, title insurance premiums, and real estate commissions. Fewer exchanges could mean fewer transactions, and less of all that.
Legislative context
Section 1031 has been in the tax code since 1921, and it has outlasted every major rewrite since:
- Tax Reform Act of 1986: survived intact while many other tax preferences were repealed.
- Tax Cuts and Jobs Act of 2017: personal property such as equipment and vehicles lost 1031 eligibility, but real property exchanges stayed.
- Biden administration proposals, 2021-2024: sought to cap deferral at $500,000 a year; not enacted.
- Current status, March 2026: Section 1031 for real property remains fully intact, with no pending legislation to change it.
That staying power reflects an unusually broad constituency, from individual landlords to institutional investors, and a body of economic evidence for the role exchanges play in property markets.
1031 exchanges are a mainstream real estate tool used by hundreds of thousands of investors a year, many of them middle-income individuals with modest rental holdings. The economic research points to their role in property improvement, capital redeployment, and job creation. The deferral is a timing cost to the Treasury, but the transactions it enables generate their own public revenue along the way.
Frequently asked questions
How much tax is deferred through 1031 exchanges each year?
The Joint Committee on Taxation's tax-expenditure estimates have ranged widely by publication year and method. Whatever the figure, it is a deferral rather than a permanent loss: the tax is collected when the property is eventually sold without another exchange, though stepped-up basis at death can make some portion permanent.
Are 1031 exchanges only for rich people?
No. Ernst & Young research puts the median income of exchange participants at about $132,000, and many exchanges involve small rental properties held by middle-income investors.
Could Congress eliminate 1031 exchanges?
It could, but Section 1031 has survived every tax reform since 1921. Real estate, farming, and small business groups form a large constituency defending it, and proposals to cap or limit exchanges surface periodically without being enacted.