Miss a 1031 deadline and your tax deferral can disappear fast. If you are selling an investment property and eyeing Destin for your next move, the clock and the coastal market both matter. You want a smooth swap, clear steps, and a local plan that fits short‑term rental or long‑term goals. This guide shows you the exact timeline, how to use a Qualified Intermediary, and smart tactics for sourcing replacement properties in Destin.
Let’s dive in.
1031 deadlines at a glance
Two timelines run together after you close on the property you sell. You have 45 days to identify replacement properties in writing. You have 180 days to close on the replacement, or the date your tax return is due for that year, whichever comes first.
These windows start on the same day as your sale. Extensions to file taxes do not extend beyond the maximum allowed. If you miss either deadline, the exchange generally fails.
Identification rules you can use
Your identification must be written, signed, and delivered to your Qualified Intermediary or the seller or agent of the replacement property within 45 days. Use a clear legal description, full street address, or unique property identifier.
You can follow these safe harbors:
- Three‑property rule: identify up to three properties of any value.
- 200% rule: identify any number of properties as long as total value is no more than 200% of what you sold.
- 95% exception: if you exceed those limits, you can still succeed if you acquire at least 95% of the value of everything you identified.
Example: If you sold for $1,000,000, the 200% rule lets you identify multiple properties whose total value does not exceed $2,000,000.
Same‑taxpayer rule
The taxpayer that sells must be the same taxpayer that buys. If you hold title in an individual name or a single‑member LLC taxed as a disregarded entity, matching is usually straightforward. If you are in a multi‑member LLC, partnership, or corporation, confirm structures early with your tax advisor so the exchange stays compliant.
Types of exchanges
- Delayed exchange: you sell first, then buy within 180 days. This is most common.
- Reverse exchange: you buy first through a special titleholder, then sell. It is more complex and costly.
- Improvement exchange: you direct funds for improvements before you take title, but all work must be done within 180 days and strict rules apply.
- DSTs and fractional interests: allowed if structured properly. These can suit passive investors or tight timelines.
What a QI does
A Qualified Intermediary receives and holds your sale proceeds so you do not take constructive receipt. The QI prepares exchange documents, coordinates assignments, moves funds to your replacement closing, and keeps the paper trail you need for tax reporting.
Your QI cannot be you or a disqualified person, such as your attorney, CPA, broker, or employee if they provided certain services in the past two years. Engage the QI before your sale closes so proceeds go directly to the QI at closing.
How to choose a QI
Ask about experience in Florida, references, and coverage such as insurance and fidelity bonds. Request a clear fee schedule, including any reverse or improvement fees. Review contract terms, wiring instructions, and hold periods in writing. Best practice is to sign the engagement before you market or close your sale.
Destin market factors to plan around
Destin and Okaloosa County are coastal and resort‑oriented with a strong short‑term rental segment and a parallel long‑term rental market. Demand is seasonal, with peaks in late spring and summer. Coastal traits can add underwriting steps, including flood and elevation checks, wind and hurricane exposure, insurance requirements, and title or survey nuances.
Local rules and association limits can affect rental use. Verify city and county regulations, business licensing, tourist tax requirements, and HOA or condo restrictions for every candidate property.
Find replacement property in Destin
Use a local broker with STR and investment experience to screen options for zoning, HOA rules, and registration needs. Pre‑identify multiple choices so you can use the three‑property or 200% rules with confidence.
To qualify STR candidates, review occupancy history, average daily rates, seasonality, and expense profiles such as management, cleaning, utilities, and insurance. Consider a mix of on‑market listings and off‑market leads like owner buyouts or portfolio sales. For passive investors or tight schedules, DSTs and fractional products can offer predictable timelines.
Financing on coastal deals
Coastal loans can take longer because lenders assess wind and hurricane exposure, flood requirements, insurance availability, and sometimes wind mitigation inspections. Pre‑approval and early communication can keep you on track. If timing is uncertain, you can consider all‑cash or bridge financing so you close well within 180 days.
Regulatory and title checks
Confirm short‑term rental legality, registration status, and local tax obligations for each property. Review HOA or condo documents for any rental restrictions or approval processes. On coastal parcels, check for easements, beach access items, or permits needed for renovations. Verify flood insurance eligibility, wind coverage, and deductibles. Early title and insurance work helps avoid last‑minute delays.
Step‑by‑step timeline
- Pre‑sale, 30–90+ days before listing:
- Engage your CPA and a QI with Florida experience.
- Pre‑qualify financing and define equity and debt needs.
- Start sourcing replacement options and line up inspections.
- Day 0, sale closes:
- QI receives proceeds and exchange agreement is in place.
- Your 45‑day and 180‑day clocks start.
- Days 1–45:
- Perform due diligence on multiple properties.
- Deliver signed written identification to your QI by Day 45.
- Continue financing and title work on your top choice and backups.
- Days 46–180:
- Close on replacement property before Day 180 or the applicable tax return due date, whichever comes first.
- If you reduce debt, plan to add cash so you avoid taxable boot.
- Post‑exchange:
- Keep all exchange documents and closing statements.
- File Form 8824 with your return for the sale year.
Avoid these pitfalls
- Missing Day 45 or Day 180. Prepare early, engage your QI before you sell, and identify backups.
- Receiving sale funds directly. Have the QI hold proceeds and coordinate with the closing agent.
- Vague or late identification. Use exact addresses or legal descriptions, sign, and deliver on time.
- Mortgage boot. If replacement debt is lower, be ready to add equity to avoid taxable boot.
- Different taxpayer on title. Match ownership and confirm entity structures early.
- Coastal underwriting surprises. Get insurance quotes and lender requirements upfront.
- STR restrictions. Confirm rules with the city, county, and HOA or condo before you identify.
Documents you will need
- QI engagement letter and exchange agreement.
- Written property identification delivered within 45 days.
- Closing statements for both sales and purchases.
- Lender commitment letters and proof of funds.
- HOA or condo documents that address rental rules.
- Insurance quotes for wind and flood, and elevation certificates if applicable.
When to consider alternatives
- Reverse exchange: Use when you must secure a rare property before you sell. Expect more complexity and higher costs.
- Improvement exchange: Use when you need renovations completed before you take title. All improvements must be done within 180 days.
- DSTs or fractional options: Use when you want passive ownership or a faster, predictable closing path.
Build your Destin team
A successful exchange is a team sport. Work with a QI who knows Florida, a local broker skilled in Destin investment property, a CPA or tax counsel, and a title company familiar with coastal conveyancing. This group can shorten timelines, reduce risk, and help you close within the exchange window.
If you are planning a 1031 move into Destin, you do not have to navigate it alone. Let an experienced local advisor help you source, vet, and close the right property on time. Connect with Albert Baeza to map your timeline and shortlist properties that fit your goals.
FAQs
How do the 45‑ and 180‑day periods work in practice?
- Both start the day you close on the sale; you must identify in writing by Day 45 and close on the replacement by Day 180 or your tax return due date, whichever comes first.
What counts as a valid property identification?
- A signed written notice with a clear address or legal description delivered to your QI or the seller or agent within 45 days; keep proof of delivery.
How do the three‑property and 200% rules differ?
- Three‑property allows up to three picks of any value; 200% allows more than three as long as total value does not exceed double what you sold.
What does a Qualified Intermediary actually do?
- The QI holds proceeds to avoid constructive receipt, prepares exchange documents, coordinates assignments, moves funds to closing, and keeps records for your tax filing.
What Destin STR checks should I do before I identify?
- Confirm local rental legality, required registrations and taxes, HOA or condo rules, and review insurance availability, seasonality, and projected revenue and expenses.
How do insurance and flood issues affect timing?
- Lenders require acceptable wind and flood coverage, which can add underwriting steps; get quotes and documents early so you stay within the 180‑day window.
When should I consider a DST or reverse exchange?
- Consider a DST for passive ownership or predictable closing, and a reverse exchange when you must buy first to secure a unique property, understanding added cost and complexity.
What causes taxable boot and how do I avoid it?
- Receiving cash or reducing debt without adding equity can create boot; plan to replace equal or greater value and debt, or add cash to keep the exchange fully deferred.
