1031 Exchange Timeline & Mistakes Metro Detroit Investors Make

A 1031 exchange allows Metro Detroit real estate investors to defer capital gains taxes when selling and reinvesting in like-kind property—but only if strict IRS deadlines are met. You must identify replacement properties within 45 days and close within 180 days, and common mistakes like late identification, incorrect ownership, or skipping a Qualified Intermediary can completely disqualify the exchange. Planning ahead with a CPA is critical if you want the tax deferral to hold.

What Is a 1031 Exchange (and Why Timing Matters)

A 1031 exchange lets real estate investors defer capital gains taxes by reinvesting proceeds from a sale into another qualifying property. This strategy is widely used by rental property owners and commercial investors across Metro Detroit, including Detroit, Troy, and Warren. The IRS rules are rigid. There is no flexibility if you miss a deadline or structure the transaction incorrectly. Once your property closes, the clock starts immediately.

The 1031 Exchange Timeline You Must Follow

The two most important deadlines are non-negotiable:

• 45 days: Identify potential replacement properties in writing
• 180 days: Close on one or more of the identified properties

These timelines run concurrently, not separately. The 180-day deadline does not pause or reset if problems arise during the purchase process.

The Most Common 1031 Exchange Mistakes Investors Make

Many failed exchanges come down to preventable planning issues. The most common mistakes include:

• Missing the 45-day identification deadline
• Holding title differently on the replacement property than the relinquished property
• Receiving sale proceeds directly instead of using a Qualified Intermediary

Even experienced investors in Sterling Heights and throughout Metro Detroit can lose the tax deferral if these details are overlooked.

Why a CPA Should Be Involved Before You List the Property

A 1031 exchange is not just a real estate transaction—it’s a tax strategy. A CPA helps determine whether a 1031 exchange actually makes sense based on your income, future plans, depreciation history, and potential tax exposure. At PLW CPA PLLC, we work with Metro Detroit investors to:

• Evaluate whether a 1031 exchange is the best option
• Coordinate with your Qualified Intermediary and other advisors
• Ensure reporting is handled correctly on your tax return

This planning is especially important if you own multiple properties, operate through an LLC, or are considering a partial exchange.

 

You can learn more about how we support property owners here

Coordinating With a Qualified Intermediary

A Qualified Intermediary (QI) is required to hold the sale proceeds during a 1031 exchange. However, the QI does not provide tax advice. Your CPA and QI serve different roles. Your CPA ensures the transaction aligns with your broader tax strategy, while the QI handles escrow and documentation. When these roles are not coordinated, costly errors often occur.

 

For broader strategy guidance, explore more about business tax planning here.

Local Considerations for Metro Detroit Investors

Metro Detroit investors often face additional complexity due to:

• Multi-property portfolios
• Properties held in different entities
• Out-of-state reinvestments after selling Michigan properties

Working with a CPA who understands local market dynamics in Detroit, Troy, Warren, and surrounding areas helps ensure the exchange aligns with both state and federal tax requirements.

 

Ready to Plan Before You Sell?

If you’re thinking about selling an investment property, the worst time to ask about a 1031 exchange is after closing. The best time is before the property is listed.

 

PLW CPA PLLC helps Metro Detroit real estate investors plan exchanges properly, avoid disqualifying mistakes, and integrate 1031 strategies into long-term tax planning.

 

Schedule a consultation before your sale closes:
https://www.plwcpa.com/contact