A 1031 exchange (named for IRS Section 1031) lets real estate investors defer capital gains taxes when selling an investment property by reinvesting the proceeds into a “like-kind” replacement property. In Colorado, where a Denver investor might have $200,000-$400,000 in appreciation on a property held since 2015, the tax deferral can be worth $50,000-$100,000 or more.
Key rules: the replacement property must be identified within 45 days of closing on the sold property, and closed within 180 days. The replacement property must be of equal or greater value. You must use a qualified intermediary (a third-party escrow company) — you cannot touch the proceeds yourself. Both the sold and purchased properties must be held for investment or business use, not personal use. Primary residences don’t qualify. Colorado has no additional state-level 1031 requirements beyond the federal rules. Work with a qualified intermediary and a CPA who specializes in real estate before initiating — the deadlines are hard and mistakes can’t be undone.