You only get one shot at a 1031 exchange timeline. Miss a day or touch the proceeds, and your tax deferral can disappear. If you invest in Salem, you want to keep more capital working while navigating New Hampshire’s recording costs and Rockingham County logistics. In this guide, you’ll learn the exact timing rules, common pitfalls, and local steps that matter in Salem so you can plan with confidence. Let’s dive in.
1031 exchange basics
A 1031 like-kind exchange lets you sell investment or business real estate and reinvest in like-kind property while deferring federal capital gains and depreciation recapture. The rules are federal and very strict. You report the exchange on IRS Form 8824 and must follow the identification and closing deadlines precisely. For detailed definitions and reporting, review the IRS Form 8824 instructions.
Why it matters in Salem
Salem’s market has been tight, with local sources showing steady pricing and faster sales, which increases turnover and the appeal of tax deferral. You’ll often see competitive listings and modest year-over-year gains that make preserving equity important for your next purchase. For a local snapshot, check Salem market trends.
New Hampshire does not tax personal capital gains, so federal tax is the main item deferred for individual investors. If you operate through an entity, factor in potential Business Profits Tax and Business Enterprise Tax exposure and confirm with your CPA. See the state’s overview of New Hampshire business taxes and a primer on NH’s 1031 context from 1031ex.
At closing, plan for New Hampshire’s Real Estate Transfer Tax and recording surcharges. These are separate from federal income tax and are paid when deeds record in Rockingham County. Review the state’s Real Estate Transfer Tax guidance and the county’s recording fees and LCHIP surcharge.
The two hard deadlines
The federal timelines are absolute and measured in calendar days.
- 45-day identification period: Starting the day your sale closes, you have 45 days to deliver written identification of your replacement property or properties. Weekends and holidays count. See the detailed timing overview from 1031 Specialists.
- 180-day exchange period: You must close on the replacement property by the earlier of 180 days from your sale or your federal tax return due date for that year, including extensions. These clocks run at the same time, not back-to-back. The IRS clarifies this in the Form 8824 instructions.
Identification rules to know
- Three-property rule: Identify up to three properties, any value.
- 200 percent rule: Identify more than three, as long as total value does not exceed 200 percent of your sale price.
- 95 percent rule: Identify any number or value, but you must acquire at least 95 percent of the total identified value. See the rule set summarized by 1031 Specialists.
Pitfalls that derail exchanges
Avoid these common errors that can convert a planned exchange into a taxable sale.
Missing day 45 identification
- Why it’s fatal: No valid written identification by day 45 ends the exchange.
- What to do: Prep options early and send written IDs immediately after closing to your qualified intermediary. Timing rules are summarized by 1031 Specialists.
Touching the money, or a risky QI
- Why it’s fatal: If you receive or control sale proceeds, the exchange fails. Poor QI practices have led to losses and disqualification.
- What to do: Vet your QI’s escrow setup, insurance, and financial strength. Learn more about QI risk from Realized’s overview.
Replacing with lower value or less debt
- Why it’s costly: Cash back or non-like-kind property is taxable “boot.” Reducing debt on the replacement property can create mortgage boot.
- What to do: Prearrange financing to match or increase value and debt. See a plain-language reminder on boot in this industry summary.
Overlooking your tax return due date
- Why it’s a trap: If your return due date comes before day 180, that earlier date governs.
- What to do: Coordinate with your CPA early and file an extension if needed to preserve the full window. The rule is outlined in the IRS instructions.
Related-party missteps
- Why it’s risky: Related-party exchanges have special holding and anti-abuse rules.
- What to do: Involve tax counsel before you structure anything with family or controlled entities. See the IRS related-party guidance.
Reverse or improvement exchanges without expert help
- Why it matters: These structures are complex and more expensive, and they still must meet strict timing.
- What to do: Use an experienced accommodator and counsel. The IRS addresses these structures in the Form 8824 instructions.
New Hampshire and Rockingham County logistics
- Transfer tax and recording: Budget for the state’s Real Estate Transfer Tax and county recording surcharges at deed recording. Review the state’s RETT page and Rockingham County fee schedule.
- Where you record: Salem properties record at the Rockingham County Registry of Deeds. Exchange, accommodator, or EAT deeds must meet local standards.
- Property tax planning: Salem’s local tax rate and assessment practices affect after-exchange cash flow. Check current details with the Town’s FAQ and resources when modeling replacement property numbers.
Simple timeline for Salem investors
Before listing or signing a PSA
- Confirm eligibility and entity-level tax effects with a CPA or tax attorney.
- Choose a reputable Qualified Intermediary early. See practice pointers in KPMG’s overview of new IRS QI FAQs.
- Align your financing plan so value and debt replacement target full deferral.
At sale closing
- Execute your exchange agreement with the QI.
- Direct all proceeds to the QI, not to you.
- Start your 45-day clock and prepare written IDs.
Days 1 to 45
- Identify properties in writing that meet the 3-property, 200 percent, or 95 percent rules.
- Line up inspections, financing, and title work to move fast.
Days 46 to 180
- Close on one or more identified properties by the earlier of day 180 or your tax return due date.
- Coordinate Rockingham County recording, RETT stamps, and any required declarations.
- File IRS Form 8824 with your return and keep complete records.
Build the right team
- CPA or tax attorney with 1031 expertise, especially if you own through an entity subject to NH BPT or BET.
- A financially sound Qualified Intermediary. The IRS provides context on QIs in its program page and practitioners highlight due diligence in the KPMG summary.
- A local title company or closing attorney familiar with Rockingham County recording standards.
- A local real estate team experienced with investment property and 1031 timing.
Ready to plan your exchange?
A successful 1031 in Salem comes down to preparation, precise timing, and local execution. When you have your QI, financing, and recording details locked in early, you protect your deferral and your buying power. If you want a local guide who understands the steps from listing to Rockingham County recording, connect with Shannon Dipietro to map your next move.
FAQs
What is a 1031 exchange for Salem investors?
- A 1031 exchange lets you sell investment or business real estate and buy like-kind property while deferring federal capital gains and depreciation recapture, as outlined in the IRS Form 8824 instructions.
How do the 45-day and 180-day deadlines work?
- You have 45 calendar days after closing to identify replacement properties, and you must close by the earlier of 180 days or your tax return due date for that year. These periods run at the same time.
Does New Hampshire tax my gain after a 1031 exchange?
- New Hampshire does not impose personal capital gains tax, so the main deferral is federal. If you own through an entity, confirm potential BPT or BET effects with your CPA.
What is “boot” in a 1031 exchange?
- Boot is taxable value you receive, such as cash, non-like-kind property, or reduced debt on the replacement property compared to the relinquished property.
Where do I record deeds for Salem properties?
- Deeds for Salem properties are recorded at the Rockingham County Registry of Deeds, where you also pay transfer tax stamps and recording surcharges.
