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Yes, you can do a 1031 exchange out of state. Real property in the United States is like-kind to other United States real property in any state, and foreign real property is not like-kind (26 U.S.C. 1031(a)(1) and 1031(h); Treas. Reg. 1.1031(a)-1(b)). That is why some exchangers sell in a high-tax state and buy single-tenant net lease (NNN) property in a state without a broad personal income tax. This guide compares those states, shows the live NNN inventory in each, and covers the state rules that can follow your gain when you leave.
States Without a Broad Personal Income Tax: 1031 NNN Inventory
Inventory columns update automatically from Investment Grade Research market observations of publicly marketed offerings and broker materials, as of October 30, 2026. Tap a state for every observed listing, tenant and city breakdowns, and the state’s transfer tax.
| State | Personal income tax status | NNN listings | Median asking cap |
|---|---|---|---|
| Alaska | Repealed its individual income tax in 1980 (ch. 2, 2nd Special Session Laws of Alaska 1980) | Under 5 | n/a |
| Florida | Constitution bars a state tax on residents’ personal income (Fla. Const. art. VII, sec. 5(a)) | 689 | 5.75% |
| Nevada | No state tax on wages (Nevada Department of Taxation) | 63 | 6.00% |
| New Hampshire | No tax on W-2 wages; interest and dividends tax repealed January 1, 2025 (NH DRA; RSA ch. 77) | 20 | 6.60% |
| South Dakota | No state income tax (South Dakota Department of Revenue) | 12 | 6.38% |
| Tennessee | Hall tax on interest and dividends repealed from 2021 (Tennessee Department of Revenue) | 218 | 6.31% |
| Texas | Constitution bars a tax on individuals’ net incomes and capital gains (Tex. Const. art. VIII, secs. 24-a, 24-b) | 935 | 6.25% |
| Washington | No individual income tax now; capital gains tax exempts real estate sold by deed; a 9.9% tax on income above $1 million begins 2028 (RCW 82.87.050; ESSB 6346) | 92 | 6.25% |
| Wyoming | No individual income tax (Wyoming Legislative Service Office, 2025) | 12 | 6.50% |
Median asking cap rate across observed listings with a published asking price and cap rate. National median: 6.35%. State pages are published once a state has at least 5 observed listings. Washington’s 2028 income tax is subject to Initiative IP26-645 on the November 3, 2026 ballot (Washington Secretary of State).
Does a 1031 Exchange Avoid State Taxes?
A 1031 exchange defers federal tax on the gain. Moving the replacement property to another state does not always end your old state’s claim on the gain it sourced:
- California requires Form FTB 3840 for the year of the exchange and each later year, generally until the California-source deferred gain is recognized, and can tax that gain when the out-of-state replacement property is later sold in a taxable sale (FTB 3840 instructions; Cal. Rev. and Tax. Code 18032). Details: California Form 3840 and the 1031 clawback.
- Oregon adds back up to the gain deferred at the exchange when the replacement property is later disposed of, and requires Form OR-24 for the exchange year and each year after until that disposition (ORS 316.738; Oregon Department of Revenue, Form OR-24 instructions).
- Massachusetts treats the part of the gain that reflects appreciation of Massachusetts real estate as Massachusetts-source income (830 CMR 62.5A.1(3)(d)1.a).
The destination state matters too. Transfer taxes at closing differ: the Texas Constitution bars new state transfer taxes on fee simple conveyances (art. VIII, sec. 29), South Dakota charges 50 cents per $500 (SDCL 43-4-21), and Washington charges a graduated excise tax (RCW 82.45.060). Each state page lists its rate with the statute.
Direct NNN Ownership or a DST for an Out-of-State Exchange
A Delaware statutory trust (DST) lets you exchange into a fractional interest without day-to-day landlord duties. The trade-off is control. In Revenue Ruling 2004-86, the IRS treated a DST interest as real property for a 1031 exchange where the trustee could not accept new contributions, could not renegotiate or refinance the acquisition debt, and could not renegotiate the lease or sign new tenants except on the tenant’s bankruptcy or insolvency; a trustee with powers such as renegotiating the lease or refinancing the debt would make the trust a business entity. With a directly owned NNN property you hold the deed: you choose the tenant credit, the lease term, the financing and when to sell or exchange again. A DST offering filed under Regulation D reports sales commissions and finders’ fees on SEC Form D (Item 15); ask the sponsor for the full fee and load table in the private placement memorandum and compare it with a direct purchase. More on DST vs direct property for a 1031 exchange.
Browse every 1031 exchange NNN property for sale or check tenant credit on the investment grade credit tenant ratings list. More research on investment grade net lease property is on the home page.
Frequently Asked Questions: 1031 Exchange Out of State
Can you do a 1031 exchange in a different state?
Yes. Real property in the United States is like-kind to other United States real property, so you can sell in one state and buy in another (26 U.S.C. 1031(a)(1) and 1031(h)). Foreign real property is not like-kind to United States real property.
Does a 1031 exchange have to be in the same state?
No. The like-kind rule is federal and covers real property anywhere in the United States (26 U.S.C. 1031(h); Treas. Reg. 1.1031(a)-1(b)). State reporting rules can still follow the gain, as in California and Oregon.
Does a 1031 exchange avoid state taxes?
It defers the gain, but some states keep a claim on gain they sourced. California requires Form FTB 3840 each year, generally until the deferred gain is recognized (FTB 3840 instructions; Cal. Rev. and Tax. Code 18032), and Oregon requires Form OR-24 until the replacement property is disposed of (ORS 316.738; Oregon Department of Revenue, Form OR-24 instructions). Ask your CPA how your state treats it.
Which states have no broad personal income tax?
Alaska, Nevada, South Dakota, Texas and Wyoming do not tax individual income, and Florida’s Constitution bars a state tax on residents’ income. Tennessee repealed its tax on interest and dividends from 2021, and New Hampshire does not tax wages and repealed its interest and dividends tax effective 2025. Washington has no individual income tax today, taxes certain capital gains (real estate sold by deed is exempt), and has enacted a 9.9% tax on income above $1 million beginning in 2028. Sources for each are in the table above.
Do the 45-day and 180-day deadlines change by state?
No. Replacement property must be identified within 45 days after the sale and received by the earlier of 180 days after the sale or the due date, including extensions, of your tax return for that year, wherever the property is (IRC 1031(a)(3); Treas. Reg. 1.1031(k)-1(b)(2)).
