President Biden’s budget was released today, and it includes modifying the IRS Code 1031 tax-deferred exchanges. His current version probably has no chance of passing as-is:
The proposal would allow the deferral of gains up to an aggregate amount of $500,000 for each taxpayer ($1 million in the case of married individuals filing a joint return) each year for real property exchanges that are like-kind. Any gains from like-kind exchanges in excess of $500,000 (or $1 million in the case of married individuals filing a joint return) a year would be recognized by the taxpayer in the year the taxpayer transfers the real property subject to the exchange.
But limits on net profit would encourage investors to sell their properties more often, which would create more inventory – when there aren’t many other ways to encourage selling. Want to avoid capital-gains tax on your primary residence? Move every time you reach the $500,000 limit on net profits!