What qualifies
Rental houses and apartment buildings
Held for investment: property intended to produce income or appreciate.
Commercial buildings and warehouses
Used in a trade or business, including the building your company operates from.
Working farms
A small farm or inherited acreage is often investment property without the owner ever thinking of it that way.
Vacant land held for appreciation
Including a lot you bought years ago 'just in case.'
You may own investment property without thinking of it that way. All of these are typically investment property for Section 1031 purposes.
What doesn’t qualify
IRC § 121
Your primary residence
On either side of the exchange. It has its own tax break: the Section 121 exclusion of up to $250,000/$500,000 of gain.
Property held primarily for resale
Flip inventory falls outside 'held for investment.'
Mixed-use property: the part that surprises people
A home on acreage can often be split for tax purposes: the residence portion follows residential rules, while the acreage qualifies as investment property whose gain can be deferred through a 1031 exchange. Your tax preparer likely already treats them as separate assets.
Vacation homes
Somewhere in between: a vacation property can qualify if it’s genuinely operated as a rental (the IRS safe harbor looks for at least 14 days of rental use per year and limited personal use across two years). If your “second home” earns real rental income, it’s worth a conversation.