A 1031 exchange in Indiana lets you sell investment real estate and reinvest in like-kind property while deferring the tax on the gain. The federal rules apply the same way everywhere. Indiana has one of the lowest flat state rates in the country and no nonresident withholding step, and it sits at the center of the national distribution network. We act as your qualified intermediary, holding the proceeds and handling the documentation so the exchange holds from sale to closing.
Table of contents
- How much is capital gains tax on real estate in Indiana?
- Indiana 1031 exchange rules and timeline
- 1031 exchanges across Indiana markets
- Common Indiana 1031 exchange mistakes
- Start your Indiana 1031 exchange
- Frequently asked questions
How much is capital gains tax on real estate in Indiana?
Indiana taxes the gain as ordinary income at a flat rate of about 3% for 2026, which has been declining, with local county income taxes generally applying as well. That sits on top of the federal tax an exchange also defers:
- Long-term capital gains at 0%, 15%, or 20%, with the 20% rate applying above $545,500 of taxable income for single filers and $613,700 for married couples filing jointly in 2026.
- The 3.8% Net Investment Income Tax above $200,000 of modified adjusted gross income for single filers, $250,000 for married couples.
- Depreciation recapture, taxed as unrecaptured Section 1250 gain at up to 25%.
- Indiana's flat rate on the gain.
Indiana conforms to Section 1031, so a properly structured exchange defers both the federal and the Indiana tax. The full federal framework is in our main 1031 exchange guide.
Indiana 1031 exchange rules and timeline
The federal deadlines govern, and they are strict:
- 45-day identification. Identify replacement property in writing within 45 days of the sale.
- 180-day closing. Close within 180 days of the sale, or by your return due date including extensions, whichever is earlier.
- No constructive receipt. Proceeds go to your qualified intermediary, never to you.
- Equal or greater value and debt. Reinvest all net proceeds and match or exceed the relinquished value and debt, or the shortfall is taxable boot.
- Same taxpayer. The entity that sold must be the entity that buys.
Indiana does not impose a general nonresident real estate withholding at closing, so closings here are straightforward.
1031 exchanges across Indiana markets
Indianapolis carries most of Indiana's exchange volume, and its defining strength is logistics and distribution: the metro's central location and freight access have made it one of the country's major industrial and warehouse markets, a frequent target for industrial exchanges, alongside steady multifamily demand. Fort Wayne adds a manufacturing base, Bloomington is anchored by Indiana University, and Northwest Indiana, around Gary and Hammond, functions as an industrial extension of the Chicago metro and draws capital from across the state line. Indiana caps property taxes as a percentage of assessed value, which makes carrying costs relatively predictable, though you should confirm the rate and cap class for any specific deal.
Common Indiana 1031 exchange mistakes
- Taking receipt of the proceeds, even briefly, which disqualifies the exchange.
- Missing the 45-day identification window.
- Trading down or pulling cash out, which creates taxable boot.
- Overlooking local county income tax when estimating the state-level cost.
Start your Indiana 1031 exchange
Set up your exchange before your relinquished property closes, so the proceeds never reach your hands and the 45-day and 180-day clocks start clean. Contact our team to begin, or to talk through a specific deal.
Frequently asked questions
How much is capital gains tax on real estate in Indiana?
Indiana taxes the gain as ordinary income at a flat rate of about 3% for 2026, plus local county income tax, on top of federal capital gains tax.
Is there nonresident withholding when I sell Indiana property?
No. Indiana does not impose a general nonresident real estate withholding at closing.
Does Indiana conform to federal 1031 rules?
Yes. A properly structured exchange defers both the federal and the Indiana tax.
Do I need a qualified intermediary for an Indiana 1031 exchange?
Yes. The intermediary must hold the proceeds and facilitate the exchange. Engage one before the relinquished property closes.
This page is general information, not tax or legal advice. We act as a qualified intermediary and do not provide tax or legal advice. State and federal rules and thresholds change; confirm current figures with your tax advisor.
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