Thinking about using a 1031 exchange to pivot into Elmhurst? Tight deadlines, local recording rules, and property taxes can make or break your outcome. You want a clear plan that fits the federal rules and the realities of DuPage County. In this guide, you’ll learn the key timelines, Illinois conformity, local fees, and the types of Elmhurst properties investors often choose. Let’s dive in.
Why Elmhurst appeals to investors
Elmhurst offers strong commuter access on Metra’s Union Pacific West Line at the Elmhurst station, which supports demand for rentals and well-located commercial space. Elmhurst’s Metra stop anchors an active downtown and makes access to Chicago straightforward. Local market snapshots show steady interest and rising values over time, so model cap rates and rents carefully when you shortlist properties.
1031 rules you must meet
A Section 1031 exchange lets you defer gain when you sell business or investment real property and acquire like-kind U.S. real property under strict rules. The exchange is reported on IRS Form 8824. Review the IRS Form 8824 instructions before you start.
- Identify replacement property in writing within 45 days of selling your relinquished property, and close within 180 days. There are no extensions. The 180-day window may be shortened by your tax-return due date. See the IRS guidance.
- Use a Qualified Intermediary (QI) for a delayed exchange so you never take constructive receipt of the sale proceeds. If you receive the funds, the exchange fails. Learn the workflow from this overview of exchange steps and safe harbors.
- For full deferral, buy equal or greater value and replace equal or greater debt to avoid taxable “boot.” See examples in the IRS instructions.
Depreciation recapture and taxes
A 1031 exchange defers both capital gains and depreciation recapture, it does not erase them. If you later sell the replacement property in a taxable sale, the deferred gain becomes taxable. Unrecaptured Section 1250 gain from depreciable real property can be taxed up to 25 percent. Review the IRS instructions for Form 4797 when you model outcomes with your advisor.
Illinois and Elmhurst specifics
- Illinois generally follows federal 1031 treatment under rolling conformity. Confirm current-year rules with your tax advisor, since conformity can change. See an overview of Illinois conformity to federal 1031.
- For deed recording and transfer paperwork, Illinois requires a PTAX declaration. In DuPage County, the Recorder handles recording, and municipalities may have local requirements or fees. Check county procedures and fees with the DuPage Recorder resource.
- Property taxes drive cash flow. Use the county’s public lookup to see each Elmhurst parcel’s taxing bodies and levies. Start with the DuPage property tax breakdown example to understand the components you will model.
Replacement property options
- Direct purchases: Many exchangers acquire Elmhurst single-family rentals, small multifamily, or commercial buildings. Model rents, vacancy, and property taxes at the asset level and confirm the asset will be held for business or investment use.
- DSTs and TICs: Investors sometimes choose fractional interests to diversify or meet timelines. A properly structured Delaware Statutory Trust can qualify, as recognized in IRS Rev. Rul. 2004-86. The IRS has also provided guidelines for Tenancy-in-Common interests. These vehicles can be illiquid and may have sponsor or lender constraints, so review documents carefully.
- Multiple properties: You can identify multiple replacements using the three-property, 200 percent, or 95 percent rules. Get a quick overview of identification limits and rules.
Timeline and process
- Plan early: Line up your QI and tax advisor before listing or selling the relinquished property.
- Day 0: Close the sale, and your 45- and 180-day clocks start.
- Days 1–45: Identify replacement properties in writing to your QI under an allowed identification rule.
- Days 46–180: Perform due diligence, secure financing, and close on the replacement property using exchange proceeds. File Form 8824 with your tax return. See the IRS Form 8824 instructions for reporting details.
Elmhurst due diligence checklist
- Zoning and use: Confirm the property can be held for business or investment use and that zoning matches your plan.
- Recording and fees: Verify required state forms and DuPage County recording charges with the title company and the DuPage Recorder.
- Property taxes: Pull taxing-body detail for the parcel and forecast total levy using the county property lookup.
- Market modeling: Confirm rents, vacancy, and cap rates for your submarket. Local snapshots such as this Elmhurst market report can frame trends, but use current comps before you commit.
- Funding mix: Work with your lender and QI to replace value and debt to avoid boot.
Common pitfalls to avoid
- Missing the 45/180-day deadlines. There are no extensions. Review the IRS timing rules.
- Taking constructive receipt of funds. Keep all proceeds with your QI per the exchange process guidance.
- Triggering recapture by shifting into a replacement with a very different depreciable mix without planning. See the IRS recapture overview.
- Overlooking state or local paperwork and fees that can delay a closing.
How a local team helps
You need speed, certainty, and on-the-ground insight to execute inside the 45/180-day windows. A local, concierge team can help you source the right Elmhurst options, align closing timelines, and negotiate with confidence so your exchange stays on track. When you are ready to explore replacements or plan a sale that leads into a 1031, connect with The Anne Monckton Group for buyer and seller representation tailored to Chicago’s western suburbs.
FAQs
What is a 1031 exchange in plain terms?
- It is a process that lets you sell business or investment real property and defer taxes by buying like-kind U.S. real property within strict 45- and 180-day deadlines, as outlined in the IRS Form 8824 instructions.
How do Illinois taxes treat a 1031 exchange?
- Illinois generally conforms to federal 1031 rules under rolling conformity, but you should confirm current-year treatment with your CPA; see this summary of Illinois conformity.
What Elmhurst recording items should I expect?
- Expect Illinois PTAX filings and DuPage County recording requirements and fees; confirm specifics with your title company and the DuPage Recorder.
How do the 45- and 180-day rules work?
- You must identify replacements in writing within 45 days after you transfer the relinquished property and close on the replacements within 180 days, per the IRS guidance.
Can I use a DST or TIC instead of buying a building?
- Yes, properly structured DST and TIC interests can qualify; see IRS Rev. Rul. 2004-86 for DST treatment and review sponsor restrictions and liquidity before you commit.
