1031 identification rules: 3-property, 200% and 95%

By Tom, CPA · Updated October 27, 2026

Part of: Rental Property Taxes

TL;DR: By day 45 you must identify replacement property in writing under one of three rules: up to three properties of any value; any number whose total value is no more than 200% of what you sold; or any amount if you actually buy 95% of the value identified. You can revoke an identification in writing before day 45.

Educational only, not tax, legal, or investment advice. Examples are illustrations, not predictions. Rules and limits change; verify current figures and talk to a qualified professional about your situation.

Forty-five days. That's how long the IRS gives you to go from "I sold my rental" to "here is exactly what I'm buying," in writing, signed, delivered. It is speed-dating with properties, and Treas. Reg. 1.1031(k)-1(c) is the chaperone with a stopwatch and a clipboard. This guide covers the clipboard.

If you need the big picture first, read 1031 exchange basics and the Day 0 to Day 180 checklist.

CPA Warning Label: An identification that is vague, late, unsigned or over the limits is treated as no identification at all. Then the whole exchange can fail.

What counts as an identification

The rule has formal requirements, and the IRS doesn't award partial credit:

• In writing and signed by you, or designated in the written exchange agreement.
• Delivered before the end of the identification period to the person obligated to transfer the replacement property (the seller), or to any other person involved in the exchange who isn't a disqualified person, usually the qualified intermediary. Sending it to your own attorney or agent doesn't count.
• Unambiguous description: a legal description, street address or distinguishable name ("Unit 4B at 100 Main Street"). "Something near the lake" doesn't count.
• Deadline: midnight of the 45th day after the first relinquished property transfers. No extensions for weekends or holidays.

Any replacement property you actually receive before the end of the 45-day period is treated as identified automatically.

Three-property rule

You may identify up to three properties, regardless of their value. This is the default rule for most small investors because it's simple: you sold a $500,000 fourplex; you can identify a $2 million apartment building, a $700,000 duplex and a $450,000 condo.

You don't have to buy all three. Buying one is fine, as long as its value and the debt and cash you reinvest avoid boot. The strategy is usually a primary target plus two backups, because deals fall through for inspections, financing and the seller's sudden affection for the property.

Common mistake: identifying a fourth "just in case" property while thinking you're under the three-property rule. Once you identify four or more, you are now under the 200% rule, and if total value exceeds 200%, you're relying on the 95% exception. Count carefully.

200% rule

You may identify any number of properties as long as their aggregate fair market value, as of the end of the identification period, doesn't exceed 200% of the aggregate fair market value of all relinquished properties as of their transfer dates.

Example: you sold for $1,000,000. Five properties worth $400,000 each ($2,000,000, exactly 200%) works. Six at $400,000 ($2,400,000) does not.

"Fair market value" means the full value without reduction for debt. A $600,000 property with a $400,000 mortgage counts as $600,000. Use list price or a reasonable estimate, and document it, because if the values are challenged later and exceed 200%, you've fallen into the 95% test.

This rule is popular for investors buying several smaller properties or DST interests (see 1031 into a DST), where a sponsor's offerings can be split across many identifications.

95% exception

If you identify more than three properties and exceed 200% of value, the identification is still valid only if you actually acquire, before the end of the exchange period, identified replacement property worth at least 95% of the aggregate fair market value of everything identified.

Translation: identify ten properties worth $5 million total, and you must close on $4.75 million of them. This is rarely practical unless you're buying a portfolio under contract with high certainty. If you fail, the regulation treats you as having identified no property at all, except replacement property you received before the end of the 45-day identification period.

Bottom line: the 95% exception is a cliff, not a safety net.

Revoking an identification

You can revoke an identification any time before the end of the 45-day period, by a written, signed revocation delivered to the same person who received the identification (or a revocation written into an amended exchange agreement). After the deadline, identifications are locked.

This lets you swap a dead deal for a new one on day 40. It does not let you swap on day 50. If your top property falls apart after day 45, your fallback options are whatever you already identified. That is why backup candidates matter.

Special cases

• Incidental property: furniture or other personal property transferred with real property is disregarded for identification if its value doesn't exceed 15% of the real property's value. (Note that personal property itself no longer qualifies for 1031 deferral and is boot.)
• Alternative and multiple properties: the limits apply to all properties identified, whether as alternatives or as a package.
• Property to be built: you can identify property to be produced, describing it in as much detail as practical. You get deferral only for what has been built when you receive it.
• Reverse exchanges: identification of the relinquished property works differently. See reverse 1031 exchanges.

Choosing which rule to use

Most exchangers should pick the rule before shopping, not after.

A hybrid often works: identify three properties now under the three-property rule and, if one dies, revoke it and identify a replacement, all before day 45.

Common identification mistakes

• Identifying to the wrong person. Your real estate agent is usually a disqualified person. Send it to the QI.
• Vague descriptions. A listing number that later changes, or "one of the units in the Elm Street building," invites a challenge. Use the address and unit.
• Forgetting that day 1 is the day after closing. Count from the transfer date; day 45 is 45 calendar days later.
• Ignoring the tax return due date. That is a day-180 issue, but late-year sellers sometimes forget to extend and lose the back half of the exchange period.
• Over-identifying out of nerves. A fourth property flips you into the 200% test without noticing.
• No proof of delivery. Keep the QI's dated acknowledgment.

The IRS asks for the identification date on Form 8824, Part I. If you can't support it with a dated document, you are filling in a number you may have to defend.

Examples

Illustration 1: Frugal Fran sells a $750,000 rental on May 1, 2026. Her day 45 is June 15. On June 2 she sends the QI a signed letter identifying three properties: a $900,000 triplex, a $780,000 duplex and a $1.1 million small apartment building. Three-property rule, values irrelevant. She closes on the duplex on Sept. 20. Valid.

Illustration 2: Lavish Larry sells for $1,000,000 and identifies five condos at $350,000 each ($1,750,000, under 200%). He buys three by day 180 for $1,050,000. Valid under the 200% rule; three closings is fine.

Illustration 3: Larry tries again with seven condos at $350,000 each ($2,450,000, over 200%). He buys three for $1,050,000. That's 43% of identified value, so the 95% exception fails. The exchange fails except for any property received within the 45 days. He now owes tax on the sale, and he still has three condos. Congratulations to the condos.

Illustration 4 (revocation): Fran identifies three properties on May 20. On June 8 the triplex fails inspection. On June 10 she delivers a signed revocation of the triplex and a new identification of a fourplex to her QI. She still has three identified properties and is inside the 45 days. If the inspection had failed on June 20, five days after her deadline, she would be stuck with the two remaining candidates. Plan inspections early in the window.