Does Georgia recognize 1031 exchanges?
Yes. A Georgia 1031 exchange is treated the same way it is federally, because Georgia computes income tax starting from federal adjusted gross income, and gain deferred under Section 1031 never enters that figure. The Department of Revenue’s withholding forms treat a like-kind exchange as income that is not subject to federal or state income tax.
At 4.99% for 2026, the Georgia share of the tax on a large apartment sale is smaller than in high-rate states, but it is real money: about $50,000 on every $1 million of gain. Deferring it comes along with the federal deferral at no extra cost.
Federal 1031 rules that apply in Georgia
Georgia adds no deadlines of its own. You have 45 days from the sale to identify replacement property in writing and 180 days, or your return due date if earlier, to close on it. Both properties must be real property held for investment or for use in a business, and a qualified intermediary must hold the proceeds so you never have access to them.
To defer all the gain, buy replacement property of equal or greater value and reinvest all the net cash. Cash you keep, and debt you shed without replacing it, is boot, and both the IRS and Georgia tax it. Our guide to 1031 exchange rules covers identification and boot in detail, and the main 1031 exchange guide walks through the whole process.
Georgia withholding at closing and how an exchange affects it
When a nonresident sells Georgia real property, the buyer must withhold 3% of the purchase price under O.C.G.A. 48-7-128, or 3% of the gain required to be recognized if the seller gives a sworn gain affidavit on Form IT-AFF2. The buyer remits it on Form G2-RP by the last day of the month after the closing, so ask the closing attorney early who will prepare the forms.
An exchange changes the math. Form IT-AFF3 lists a like-kind exchange as an exemption when the income from the sale is not subject to federal or state income tax, and the DOR’s withholding guidance says withholding applies only to the extent the sale income is subject to Georgia tax. A nonresident doing a full exchange can sign IT-AFF3 and have nothing withheld. In a partial exchange, IT-AFF2 lets withholding run on the recognized gain only.
Residents are not subject to this withholding at all, and some nonresidents can be treated as residents through Form IT-AFF1, for example a seller who has filed Georgia returns for the last two years and owns other Georgia real property worth at least the withholding amount.
| Seller situation | Georgia withholding | Form |
|---|---|---|
| Georgia resident | None | None required |
| Nonresident, taxable sale | 3% of price | G2-RP |
| Nonresident, taxable sale with gain affidavit | 3% of recognized gain | IT-AFF2 |
| Nonresident, full like-kind exchange | None | IT-AFF3 |
| Nonresident, partial exchange with boot | 3% of recognized gain | IT-AFF2 |
Does Georgia have a 1031 clawback?
No. Georgia does not track gain that leaves the state in an exchange. If you trade a Savannah building for one in South Carolina, there is no annual Georgia filing like Oregon’s Form OR-24, and Georgia does not reach the deferred gain when a nonresident later sells the out-of-state replacement.
The states with clawback rules are California, Massachusetts, Montana and Oregon. If you are bringing money into Georgia from one of them, expect that state’s rules to follow the deferred gain into your Georgia property, even though Georgia itself imposes nothing extra.
Does Georgia regulate qualified intermediaries?
No. Georgia is not one of the nine states with a law regulating exchange intermediaries, which are California, Colorado, Connecticut, Idaho, Maine, Nevada, Oregon, Virginia and Washington. A Georgia intermediary does not need a state license, bond or insurance policy to hold your funds.
That puts the checking on you. Before you sign an exchange agreement, ask for the following in writing.
- Proof of a fidelity bond and errors and omissions coverage, with the amounts.
- Whether your funds sit in a separate account in your name or a pooled account.
- Whether withdrawals need two signatures, and whether you get statements.
- Who owns the company, and how long it has been doing exchanges.
- That the intermediary is not your agent from the past two years, such as your attorney, CPA, employee or broker, which federal rules bar.
Common 1031 exchange paths for Georgia owners
Most Georgia exchanges follow one of three paths, and only the out-of-state one changes your Georgia filings.
Georgia to Georgia is the simplest. An owner who trades two older buildings in Macon for one newer property in the Atlanta suburbs keeps everything under one state’s tax system, and a resident faces no withholding.
Georgia to another state is common for owners who want to move closer to family or diversify. Florida and Tennessee have no individual income tax on gains, so when you later sell the replacement as a resident there, only federal tax applies. A nonresident leaving Georgia needs the withholding paperwork at closing.
Another state into Georgia carries no Georgia-specific filing. An owner moving money in from a higher-tax state gets Georgia’s 4.99% rate on future Georgia gains, but the deferred gain from the old state may follow them if it came from a clawback state.
Georgia basis and depreciation after an exchange
Your Georgia basis in the replacement property can differ from your federal basis, and the gap carries through the exchange. The reason is bonus depreciation. Georgia has not adopted the 30%, 50% and 100% bonus rules of Section 168(k), so an owner who took federal bonus depreciation on the old building, often after a cost segregation study, depreciated those assets more slowly for Georgia.
That means a larger Georgia basis to carry into the replacement, and a smaller Georgia gain when the replacement is finally sold in a taxable sale. Ask your preparer to roll the separate Georgia schedule forward at the exchange rather than rebuilding it later from the federal return.
Exchanges by LLCs and partnerships in Georgia
An exchange has to be done by the same taxpayer that owns the relinquished property, so an LLC taxed as a partnership exchanges at the entity level. For Georgia withholding, IT-AFF3 exempts a seller covered by a composite return and, for tax years beginning on or after January 1, 2022, a seller that has made or intends to make the entity-level tax election. Those exemptions apply whether or not the sale is part of an exchange, which can simplify a closing for a pass-through owner.
Worked example: a Georgia exchange with cash boot
An owner who lives in Tennessee sells an 18-unit building in Augusta for $1,800,000. Selling costs are $72,000 and the adjusted basis is $650,000, so the gain is $1,078,000. At closing the $700,000 loan is paid off, leaving $1,028,000 of net proceeds. The owner takes $90,000 in cash, and the intermediary receives the other $938,000.
The owner buys a $1,900,000 building in Chattanooga with the $938,000 of exchange funds and a new $962,000 loan. The $90,000 of cash is boot, so $90,000 of gain is recognized and $988,000 is deferred. Georgia tax on the boot at 4.99% is $4,491, and the Georgia tax deferred is about $49,301.
Withholding: without any affidavit, the buyer would withhold 3% of $1,800,000, or $54,000. With IT-AFF2 showing $90,000 of recognized gain, withholding is 3% of that, or $2,700. The owner claims the $2,700 on a Georgia nonresident return and pays the remaining $1,791 of Georgia tax.
Because Georgia has no clawback, the owner files nothing further with Georgia after that return. When the Chattanooga building is eventually sold, the deferred gain is taxed federally, and Georgia does not reach it as long as the owner is not a Georgia resident. Had the owner sent all $1,028,000 to the intermediary and taken no cash, the whole $1,078,000 would have been deferred and IT-AFF3 would have eliminated withholding.
| Item | Amount |
|---|---|
| Sale price | $1,800,000 |
| Total gain | $1,078,000 |
| Cash boot taken | $90,000 |
| Gain deferred | $988,000 |
| Georgia tax on boot (4.99%) | $4,491 |
| Georgia tax deferred (4.99%) | $49,301 |
| Withholding with IT-AFF2 (3% of recognized gain) | $2,700 |
| Withholding with no affidavit (3% of price) | $54,000 |
Timeline tips for a Georgia exchange
Start with the closing attorney, and tell them at the start that the sale is part of an exchange, so the withholding forms are ready before the closing date.
- Sign the exchange agreement and assign the sale contract to the intermediary before closing.
- Give the closing attorney a signed IT-AFF3 for a full exchange, or IT-AFF2 for a partial one, before the closing date.
- If you sell late in the year, extend your return so the due date does not cut the 180 days short.
- Keep a Georgia depreciation schedule for the replacement; Georgia does not follow federal bonus depreciation, so your Georgia basis can differ from federal.
- Budget for the Georgia transfer tax of $1.00 for the first $1,000 and 10 cents per additional $100 on the deed.
Selling a Georgia apartment building as part of an exchange
Skyline buys apartment buildings with five or more units in Georgia. We buy directly, close on your timeline, and can work inside 1031 deadlines. We work with your intermediary and closing attorney on the contract assignment and withholding forms, and we can set a closing date that gives you time to line up a replacement first.
For the tax you would owe without an exchange, see Georgia capital gains tax on real estate. The 1031 exchange calculator runs the federal side for your own numbers.
Selling? Spread the tax with seller-carry terms
If a large tax bill is what is keeping you from selling, an installment sale may help. When you carry part of the price as a note, the gain is generally reported as you receive payments instead of all in the year of sale. Some parts of the gain, such as certain depreciation recapture, can still be due up front, so run the numbers with your CPA first.
Skyline Capital Investments buys apartment buildings with five or more units and can offer seller-carry terms, or a delayed closing that fits your 1031 timeline. Send the address and unit count and we typically respond within 48 hours. How seller financing works · How an installment sale is taxed · Seller financing calculator.
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