Can I 1031 exchange into a primary residence?
Not directly. A 1031 exchange requires both properties to be held for investment or business use, and a primary residence is personal-use property. You can, however, buy a rental with your exchange, hold and rent it out for a meaningful period, and later convert it to your home — but converting too soon can retroactively disqualify the exchange, so timing and intent matter.
The IRS looks at your intent at the time of the exchange: the replacement must genuinely be held for investment. A safe-harbor guideline many advisors follow is renting the new property at market rate for at least two years before any conversion, but that’s guidance, not a guarantee.
The reverse — 1031-ing OUT of a former home you converted to a rental — is also possible with care. This is exactly the kind of situation to run past a CPA. Related: can I 1031 a vacation home.
Learn the terms
Related questions
General education — not tax or legal advice. This explains how §1031 exchanges work in general terms and uses simplified assumptions. Rules and tax rates change and your situation is specific. Talk to a qualified CPA or tax attorney before you rely on any of it. See our full terms & legal notice.