Tax Deferred Wealth Creation
Broadly stated, a 1031 exchange also called a like-kind exchange is a swap of one investment property for another. Although most swaps are taxable as sales, if yours meets the requirements of 1031, you'll either have no tax or limited tax due at the time of the exchange.
In effect, you can change the form of your investment without cashing out or recognizing a capital gain. That allows your investment to continue to grow tax deferred. There's no limit on how many times or how frequently you can do a 1031. You can roll over the gain from one piece of investment real estate to another to another and another.
While the code doesn't directly allow for exchanges into non like kind purchases such as vacation homes. cars or college tuition, there are strategies that can be employed to use an exchange to purchase non like kind purchases or cash out tax deferred.