1031 Exchange in Ohio

By Skyline Capital Investments · Updated October 26, 2026 · 7 min read

Does Ohio recognize 1031 exchanges?

Yes. An Ohio 1031 exchange works the same as a federal one, because Ohio income tax starts from federal adjusted gross income, and deferred gain from a valid exchange never enters that figure. Under ORC 5701.11, Ohio uses the Internal Revenue Code as it stood on March 5, 2026, the date set by Senate Bill 9 of the 136th General Assembly.

The Ohio tax you defer is modest next to the federal tax. With the flat 2.75% rate for 2026, each $1 million of deferred gain holds back $27,500 of Ohio tax, while the federal capital gains, recapture and net investment income taxes on the same gain can run past $200,000. Ohio owners exchange mainly for the federal deferral, and Ohio goes along with it.

Federal 1031 rules that apply in Ohio

Ohio sets no deadlines of its own, so the federal clock governs. You have 45 days after closing to identify replacement property in writing and 180 days, or your return due date if that comes first, to close. Both the property you sell and the property you buy must be real property held for investment or for use in a business, and a qualified intermediary must hold the sale proceeds so you never have access to them.

To defer the full gain, buy replacement property worth at least the net sale price and reinvest all the net cash. Cash you keep, and debt paid off that you don’t replace with new debt or added cash, is boot and is taxed by both the IRS and Ohio. Our 1031 exchange rules guide covers identification and boot in detail, and the full 1031 exchange guide walks through an exchange from start to finish.

Does Ohio have a 1031 clawback?

No. Ohio does not track deferred gain after you exchange out of the state. Four states do: California, Massachusetts, Montana and Oregon. If you sell a building in Akron and buy one in Nashville or Tampa, Ohio has no annual form for you to file. If you have moved out of Ohio by the time you sell the replacement, Ohio has no rule that reaches back for the deferred gain. If you still live in Ohio then, the gain is taxed as part of your resident income in the year of that sale.

The reverse matters for buyers coming into Ohio. An investor who sold in California or Oregon and buys an Ohio building as the replacement still owes that state’s tracking filings. If you sell your Ohio building to an exchange buyer from one of those states, the extra paperwork is theirs, not yours.

Ohio withholding at closing and how an exchange affects it

We found no Ohio rule requiring the title company to withhold income tax from an individual seller’s proceeds. The withholding rule that does matter for many apartment sales applies to pass-through entities. Under ORC 5747.41, an LLC or partnership with nonresident individual owners pays Ohio withholding tax on their share of the entity’s income at 3%, the rate Ohio sets for taxable business income.

An exchange shrinks that base. Gain deferred under Section 1031 is not part of federal adjusted gross income, so it is not part of the Ohio income the entity reports for its owners. Only recognized gain, such as cash boot, reaches the withholding base. An Ohio LLC with an out-of-state member that completes a full exchange owes withholding only on its other income for the year.

Nonresident individuals who own Ohio property in their own names still owe Ohio tax on any gain they recognize. ORC 5747.20 allocates capital gains from Ohio real property to Ohio, so boot from an exchange of an Ohio building belongs on an Ohio nonresident return.

• Tell the title agent and your intermediary at the start that the sale is part of an exchange.
• If an entity sells, have the CPA confirm how much recognized gain, if any, flows to nonresident members.
• Ohio’s conveyance fee, up to 4 mills in total under ORC 319.54 and 322.02, is still due when the deed is filed; an exchange does not remove it.

Does Ohio regulate qualified intermediaries?

No. Ohio is not one of the nine states with laws regulating exchange intermediaries, which are California, Colorado, Connecticut, Idaho, Maine, Nevada, Oregon, Virginia and Washington. An intermediary handling an Ohio exchange does not need an Ohio bond, insurance or segregated account by statute.

That puts the checking on you. Your exchange funds may sit with the intermediary for up to 180 days, and without a state law the protection is whatever your exchange agreement provides.

• Ask whether funds go into a separate account in your name or a pooled account.
• Ask who must approve a withdrawal, and get that in the agreement.
• Ask for proof of a fidelity bond and errors and omissions coverage, and the amounts.
• If the intermediary is based in a state with a QI law, ask whether it applies the same protections to Ohio clients.
• Make sure the intermediary is not your agent from the past two years, such as your attorney, CPA, employee or broker.

Common 1031 exchange paths for Ohio owners

Most Ohio exchanges follow one of three paths.

Ohio to Ohio is common for owners trading up within the Columbus, Cincinnati or Cleveland markets, or moving from scattered small buildings into one larger property. There are no state filings beyond the normal Ohio return, but the replacement brings Ohio’s property tax rules with it. If you pay well above the auditor’s value, the next reappraisal or update can raise taxable value toward your price, and a school board can file a complaint based on the sale if the price beats the tax-list value by both 10% and an inflation-adjusted threshold under ORC 5715.19.

Ohio to out of state is common for owners chasing lower property taxes or warmer markets. Ohio places no filing burden on it. Check the destination state’s rules instead, including whether it has its own clawback or withholding.

Some owners go into a Delaware statutory trust to stop managing property. A DST interest can qualify as replacement real property, and our page on 1031 exchanges into a DST covers how that works.

Worked example: an Ohio exchange into another state

An owner sells a 30-unit building in Cleveland for $2,400,000. After $100,000 of selling costs and with an adjusted basis of $900,000, the gain is $1,400,000. The $1,000,000 mortgage is paid off at closing, leaving $1,300,000 of net proceeds. The owner takes $150,000 in cash and the intermediary receives $1,150,000.

Within 180 days the owner buys a $2,500,000 building in Indianapolis with the $1,150,000 of exchange funds and a new $1,350,000 loan. The new debt is more than the $1,000,000 paid off, so the only boot is the $150,000 of cash. That much gain is recognized and $1,250,000 is deferred.

At Ohio’s 2.75% rate, the Ohio tax on the boot is $4,125, and the Ohio tax deferred is $34,375. The owner files nothing more with Ohio for the Indiana building. Had the owner left all $1,300,000 with the intermediary and used it in the purchase, the entire $1,400,000 would be deferred, and the Ohio tax due for the year of the sale would be zero.

Partial exchanges and boot in Ohio

A partial exchange is taxed in Ohio exactly as it is federally: you pay tax on the boot and defer the rest. Ohio has no rule that treats boot more harshly, and at 2.75% the Ohio share of the tax on boot is small. Each $100,000 of cash taken at closing adds $2,750 of Ohio tax, on top of the federal tax on the same amount.

Debt counts as well as cash. If the owner in the example had bought a $2,000,000 Indianapolis building with the same $1,150,000 of exchange funds and only an $850,000 loan, the $1,000,000 mortgage paid off would be replaced by just $850,000 of new debt. The $150,000 difference is mortgage boot, which raises the recognized gain to $300,000 and the Ohio tax on it to $8,250. Taking on new debt at least equal to the old, or adding cash to make up the gap, avoids that.

If you live in an Ohio school district that taxes on the traditional base, recognized gain from boot can be taxed by the district as well, so include it in the estimate.

Timeline tips for an Ohio exchange

Start looking before you list. The 45 days begin at closing, and owners trading into a new metro need time to tour and underwrite buildings there.

• Sign the exchange agreement and assign the sale contract before closing.
• Check the replacement’s tax bill and the timing of the county’s next reappraisal or update if you are buying in Ohio.
• If you sell late in the year, extend your return so the due date does not cut the 180 days short.
• Keep Ohio’s bonus depreciation add-back schedule with the exchange file. Ohio adds back five-sixths of federal bonus depreciation and deducts it over five years, so your Ohio basis records differ from your federal ones.

Selling an Ohio apartment building as part of an exchange

Skyline buys apartment buildings with five or more units in Ohio. We buy directly, close on your timeline, and can work inside 1031 deadlines. We work with your intermediary on the assignment and can set a closing date that gives you time to find the replacement before your 45 days start.

For the tax you would owe without an exchange, see Ohio capital gains tax on real estate. The 1031 exchange calculator runs the federal side for your own numbers.