Illinois
A 1031 exchange in Illinois still needs a transfer declaration.
Illinois exempts deeds in an actual exchange of real estate from its transfer tax, except for money difference, but the declaration is still required, and the Department's instructions treat a deferred exchange separately.
Illinois taxes the transfer of real estate at 50 cents for each $500 of value, and the statute exempts deeds in an actual exchange of real estate except for any money difference. Even an exempt deed must still be accompanied by the transfer declaration, Form PTAX-203, and the Department's instructions give a separate rule for a deferred 1031 exchange: the value of property in a deferred exchange is left off the exchange line, and the exchange is explained as a special circumstance.
onezero3one acts as qualified intermediary for exchanges of Illinois property, subject to a review of each file before an exchange agreement is signed. We work with your closing agent and tax advisor; we do not give tax or legal advice.
What is specific to this state
The federal rules in IRC §1031 decide whether an exchange qualifies. The items below are state requirements that sit alongside them at closing or on the return. Each links to the official source it was checked against; confirm the current version with your closing agent and tax advisor before relying on it.
| Issue | What applies | Usually handled by | Source |
|---|---|---|---|
| Illinois state transfer tax rate | Illinois imposes its transfer tax at 50 cents for each $500 of value or fraction of $500 stated in the declaration. A mortgage the property remains subject to is excluded from the basis if the document says so. All Illinois deeds, trust documents and controlling-interest transfers not exempt. | Closing agent and county recorder, under the contract's allocation. | 35 ILCS 200/31-10, Imposition of tax (ILGA) Checked September 30, 2026 |
| Exchange exemption and declaration | Deeds in an actual exchange of real estate are exempt from the transfer tax, but money difference or money's worth paid between the parties is taxed, and the deeds must still be filed with the declaration. Actual exchanges of real estate; whether a deferred exchange deed through an intermediary qualifies is not addressed in the sources. | Closing agent files PTAX-203 with the exemption letter on line 16. | 35 ILCS 200/31-45(k), Exemptions (ILGA); Instructions for Form PTAX-203 Checked September 30, 2026 |
| PTAX-203 treatment of a deferred 1031 exchange | On Form PTAX-203, line 14 applies only to a simultaneous exchange between the parties and must not include property in a deferred IRC 1031 exchange; line 10r is where a 1031 exchange is explained as a special circumstance. Deferred exchanges reported on PTAX-203. | Closing agent completes the declaration. | Illinois Department of Revenue, Instructions for Form PTAX-203 Checked September 30, 2026 |
The Illinois transfer tax and its exchange exemption
Under 35 ILCS 200/31-10, a tax is imposed on the privilege of transferring title to real estate located in Illinois at 50 cents for each $500 of value or fraction of $500 stated in the declaration. If the transferring document says the property is transferred subject to a mortgage, the outstanding mortgage is not included in the basis for the tax.
Section 31-45(k) exempts "deeds when there is an actual exchange of real estate," except that money difference or money's worth paid from one party to the other is not exempt. The statute adds that these deeds are not exempt from filing the declaration. Cash taken out of an exchange is therefore taxed, and the declaration is required either way.
What the Department says about deferred exchanges
The Form PTAX-203 instructions deal with exchanges in three places:
- Line 14 is for other real estate transferred from the buyer to the seller as part of the sale price. The instructions say the line "only applies to a simultaneous exchange between the parties involved in this transaction" and tell the filer not to include the value of property involved in a deferred exchange under IRC §1031.
- Line 10r asks for any special facts that may have affected the sale price, and the instructions say this includes property that is part of an IRC §1031 exchange.
- Line 16 asks the filer to identify the exemption, such as (k), that applies.
The statute speaks of an "actual exchange of real estate" and the instructions do not say in so many words whether the sale deed in a deferred exchange through an intermediary qualifies for exemption (k). Do not assume it does. Ask your closing agent and the county recorder where the property sits how they will treat both the deed to the buyer and the deed for your replacement property, and make sure the declaration describes the 1031 exchange on line 10r.
State income tax
We did not find in the sources we reviewed an Illinois closing-withholding requirement for a nonresident's sale of real estate, or an annual reporting rule for out-of-state replacement property. We have not verified either point, so confirm with your tax advisor before relying on it.
Questions Illinois sellers ask
Is an exchange deed exempt from Illinois transfer tax?
Section 31-45(k) exempts deeds in an actual exchange of real estate, except for money difference. The declaration must still be filed.
Where does a 1031 exchange go on Form PTAX-203?
On line 10r, as a special circumstance. Line 14 is only for simultaneous exchanges between the parties to the transaction, and the instructions say not to include the value of property in a deferred exchange there.
Does Chicago or Cook County add a tax?
We have not reviewed local transfer taxes for this page. Ask your closing agent which local taxes apply to your property.
Related
Sources
- 35 ILCS 200/31-10 (checked September 30, 2026)
- 35 ILCS 200/31-45 (checked September 30, 2026)
- IDOR, Instructions for Form PTAX-203 (checked September 30, 2026)
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