How Does the 45-Day Identification Window Work in a 1031 Exchange?

When it comes to 1031 exchanges, timing is everything — and the 45-day identification window is one of the most critical deadlines investors face. Miss it, and the opportunity to defer capital gains taxes and maximize reinvestment potential may be lost.

While the IRS enforces this timeline strictly, there is flexibility if you act early and plan carefully. Investors can revise or revoke property identifications up until the 45-day deadline. But once that window closes, the list is final.

In this article, we’ll clarify what the 45-day rule requires, how to use it strategically and how to avoid the missteps that put exchanges at risk.

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What Is the 45-Day Identification Rule?

After you close on your relinquished property, the IRS gives you 45 calendar days to identify your replacement property or properties. This clock starts ticking the day after your sale closes and includes weekends and holidays.

To qualify, the properties you identify must be held for business or investment purposes only, not personal use. That’s a key requirement under Section 1031.

To comply with IRS requirements, your identification must:

• Be submitted in writing
• Clearly and unambiguously describe each potential replacement property
• Be signed by the taxpayer
• Be delivered to your Qualified Intermediary (QI) on or before midnight of the 45th day

For commercial investors, that 45-day period often overlaps with deal negotiations and due diligence, making it essential to plan ahead. Starting early, gathering documentation and working closely with your QI can help you navigate any surprises and keep your exchange on track.

How Many Properties Can You Identify?

That depends on your strategy. The IRS allows you to follow one of three identification rules:

• The 3-Property Rule: You can list up to three potential replacement properties, regardless of value.
• The 200% Rule: Want to list more than three? You can — as long as the combined fair market value of all identified properties doesn’t exceed 200% of the value of your relinquished property.
• The 95% Rule: If you exceed both limits above, you’ll need to acquire at least 95% of the total value you’ve identified to remain in compliance.

Each approach has pros and cons, depending on how solid your deals are and how much flexibility you need. Many commercial investors list a few backups from the start, just in case something unexpected arises during negotiations.

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What’s Allowed During the 45-Day Window?

More than just a deadline, the 45-day window is also a planning period. While you must meet IRS requirements by day 45, you're not locked into your initial identification list until that deadline passes. This gives commercial investors valuable flexibility as deals evolve and market conditions shift.

Here’s what you can do:

• Revise your list by adding new properties
• Replace previously identified properties with new options
• Revoke your entire list and submit a new one

As long as your updated identification is submitted in writing and delivered to your Qualified Intermediary (QI) before or on the 45th day, it will be considered valid. After day 45, however, no changes are allowed, even if a property falls through or becomes unavailable.

This is why many investors choose to identify multiple options early through one of the three rules mentioned above to give themselves room to adjust as negotiations unfold.

Why Timing and Documentation Matter

In a 1031 exchange, even the best investment strategy can fall apart without proper documentation. That’s why timing and execution go hand in hand. 

If you decide to revise or replace a property on your identification list, it’s not enough to simply communicate that intention verbally or by email. The IRS requires formal action and precise formatting to ensure your exchange remains compliant.

Any updates to your identification list must follow the same requirements as the original: they must be submitted in writing, clearly describe the potential replacement property(s), be signed by you as the taxpayer and be delivered to your Qualified Intermediary (QI) before midnight on day 45. 

Your QI must not only receive but also acknowledge the revision within the allowed timeframe. Late changes or informal updates (no matter how well-intentioned) will not meet IRS standards and can jeopardize the entire exchange.

If your preferred property is still in negotiation or subject to change, your best move is to work proactively with your QI. Together, you can develop a documentation strategy that keeps your options open, anticipates contingencies and safeguards your ability to defer capital gains taxes. 

In short, don’t just manage the 45-day window. Leverage it with intention.

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Avoid Missteps and Confidently Move Forward With National 1031

At National 1031, we understand what’s at stake. Our team works closely with clients to ensure every identification is accurate, timely and compliant so you can focus on making the most of your next investment. If you’re considering a 1031 exchange or navigating one now, we’re here to help you move forward with clarity and confidence.

Ready to get started or have questions about timing? Contact us today to speak with a 1031 exchange expert.

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