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Texas

A 1031 exchange involving Texas property.

Texas adds very little state tax paperwork to an exchange. The work is in the closing mechanics with the title company, and in the rules of the state you are leaving, if you are buying in Texas.

Updated September 30, 2026 · Reviewed by onezero3one professional staff on September 30, 2026

Texas has no personal income tax and, as far as we found, no state transfer tax on deeds. For an individual selling or buying Texas investment property in an exchange, the state adds little tax paperwork; the requirements come from federal law, from the title company's closing process, and from the state you are selling in if it is not Texas.

onezero3one acts as qualified intermediary for exchanges involving Texas property, subject to a review of each file before an exchange agreement is signed. We work with your title company 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.

State items for an exchange (researched September 30, 2026)
IssueWhat appliesUsually handled bySource
State income tax at closingTexas has no state or local personal income tax, so there is no state withholding or estimated-tax form on a sale of Texas real property.
Individual sellers. Entities may be subject to the franchise (margin) tax, which starts from federal return lines.		Not applicable at the state level; entity sellers ask their CPA about franchise taxTexas Comptroller, Taxes of Texas: A Field Guide (Dec. 2025)
Checked September 30, 2026
Transfer tax on the deedNo state real estate transfer, deed or documentary stamp tax was found; the Comptroller's field guide to Texas taxes lists none. Recording fees and title-company escrow fees still apply.
Absence finding; confirm with the title company.		Title companyTexas Comptroller, Taxes of Texas: A Field Guide (Dec. 2025)
Checked September 30, 2026

What Texas does not add

The Comptroller's field guide states that Texans pay federal income tax but no state or local income tax, so there is no state withholding or estimated-tax form when Texas real property is sold. The same guide lists no real estate transfer, deed or documentary stamp tax, and we found none elsewhere. That second point is an absence finding: confirm with your title company, which will still charge recording and escrow fees.

LLC and partnership sellers: franchise tax

Entities doing business in Texas, including most LLCs and partnerships, may owe the franchise (margin) tax. Its starting point, total revenue, is taken from specified lines of the entity's federal return, so federal treatment of the exchange flows into it. If your Texas property is owned by an entity, ask your CPA how the exchange will appear in the franchise tax report for the year of sale.

Buying in Texas after selling in another state

Texas is a common destination for exchanges from higher-tax states. The origin state's rules still apply:

  • California: Form 3840 is filed with the Franchise Tax Board each year after California property is exchanged for out-of-state property, until the deferred gain is recognized.
  • New Jersey: nonresident sellers claim the exemption on GIT/REP-3. See New Jersey.
  • New York: nonresident sellers file IT-2663 with box 4B. See New York.

At the Texas title company

Texas closings are usually conducted by a title company, which acts as the escrow or closing agent; an attorney may also be involved. For the exchange, the title company needs to know early that the buyer's funds or the seller's proceeds belong to the exchange:

  • On a Texas sale: the assignment notice, and instructions to wire net proceeds to the intermediary instead of to you.
  • On a Texas purchase: the assignment of the purchase contract to the intermediary, the intermediary's funds, and a settlement statement showing them.
  • Wire instructions verified by phone to a known number, never from an email alone.

Questions about Texas exchanges

Does Texas tax my 1031 gain?

Not as personal income: Texas has no personal income tax. Entities may have a franchise tax question.

Is there a transfer tax when I buy or sell in Texas?

We found no state transfer tax. Recording and title-company fees apply.

I am selling in California and buying in Texas. What changes?

California's Form 3840 requirement applies every year until the deferred California gain is recognized, even after you own Texas property. Discuss it with your tax advisor before the sale.

Related

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