AB 1611
Taxation: capital gains and losses: single-family rental homes.
Vote required
Two Thirds
Fiscal committee
No
Appropriation
No
Current location
Revenue and Taxation
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Sign in to take action- Introduced
- Passed Assembly
- Passed Senate
- To Governor
- Became Law
Bill overview
This bill modifies California tax law to prevent real estate investors from using the 1031 exchange to defer capital gains taxes on the sale of single-family rental homes. Specifically, it applies a restriction on 1031 exchanges if a taxpayer owns 50 or more such properties at the time of the sale. The changes take effect immediately and require a two-thirds vote of both houses of the legislature to pass.
Key provisions
- Prohibits the use of Section 1031 of the Internal Revenue Code for gains from the sale of single-family residential rental real property.
- Applies to taxpayers who own 50 or more single-family residential rental properties at the time of the exchange.
- The changes apply to exchanges completed on or after January 1, 2026.
- Excludes sales and acquisitions completed before January 1, 2026, from the new restrictions.
- Defines ‘qualified property’ as single-family residential rental real property.
- Defines ‘single-family residential rental real property’ to include various types of residential units.
- Requires a two-thirds vote of the legislature for passage.
- Takes effect immediately as a tax levy.
Who is affected
- Real estate investors
- Taxpayers owning single-family rental properties
- Individuals involved in 1031 exchanges
- The California Department of Tax and Fee Administration
- Property owners
Notable changes
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AB1611:v98#DOCUMENT
Bill Start
| Amended IN Assembly April 20, 2026 |
CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION
Assembly Bill
No. 1611
| Introduced by Assembly Member Haney |
| January 20, 2026 |
An act to add Sections 18031.6 and 24941.6 to the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 1611, as amended, Haney. Taxation: capital gains and losses: single-family rental homes.
The Personal Income Tax Law and the Corporation Tax Law, in modified conformity with federal income tax laws, exclude the recognition of any gain or loss on the exchange of property held for productive use in a trade or business or for investment, if that property is exchanged solely for property of a like kind that is to be held either for productive use in a trade or business or for investment, unless an exception applies.
This bill would, under both the Personal Income Tax Law and Corporation Tax Law, prohibit the application of the above-described law to gain from the exchange of single-family residential rental real property property, as defined, in this state if the taxpayer owns, as defined, 50 or more single-family residential rental real properties at the time of the sale. The bill would apply to exchanges completed on or after January 1, 2026, for purposes of taxable years commencing on or after January 1, 2026.
This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 2/3 of the membership of each house of the Legislature.
This bill would take effect immediately as a tax levy.
Digest Key
Vote: 2/3 Appropriation: NO Fiscal Committee: YES Local Program: NO
Bill Text
The people of the State of California do enact as follows:
SECTION 1.
Section 18031.6 is added to the Revenue and Taxation Code, to read:
18031.6.
(a) Notwithstanding any other law, Section 1031 of the Internal Revenue Code, relating to exchange of property held for productive use or investment, shall not apply to gain from the exchange of qualified property in this state if the taxpayer owns 50 or more qualified properties at the time the exchange is completed.
(b) For purposes of this section, the following definitions shall apply:
(1) “Owns” includes direct ownership as a named owner of the property or indirect ownership through any partial or full ownership interest in an entity that owns the property.
(2) “Qualified property” means a single-family residential rental real property.
(3) “Single-family residential rental real property” means any of the following:(A) Real property improved with one to four dwelling units, including any leasehold exceeding one year’s duration of such.(B) A unit in a residential stock cooperative, condominium, or planned unit development.(C) A mobilehome or manufactured home when offered for sale or sold through a real estate broker pursuant to Section 10131.6 of the Business and Professions Code.
(c) (1) This section shall apply to exchanges completed on or after January 1, 2026, for purposes of taxable years commencing on or after January 1, 2026.
(2) This section shall not apply to an exchange where the property to be disposed of by the taxpayer in the exchange is disposed of by that taxpayer on or before January 1, 2026, or where the property to be received by the taxpayer in the exchange is received by that taxpayer on or before January 1, 2026.
SEC. 2.
Section 24941.6 is added to the Revenue and Taxation Code, to read:
24941.6.
(a) Notwithstanding any other law, Section 1031 of the Internal Revenue Code, relating to exchange of property held for productive use or investment, shall not apply to gain from the exchange of qualified property in this state if the taxpayer owns 50 or more qualified properties at the time the exchange is completed.
(b) For purposes of this section, the following definitions shall apply:
(1) “Owns” includes direct ownership as a named owner of the property or indirect ownership through any partial or full ownership interest in an entity that owns the property.
(2) “Qualified property” means a single-family residential rental real property.
(3) “Single-family residential rental real property” means any of the following:(A) Real property improved with one to four dwelling units, including any leasehold exceeding one year’s duration of such.(B) A unit in a residential stock cooperative, condominium, or planned unit development.(C) A mobilehome or manufactured home when offered for sale or sold through a real estate broker pursuant to Section 10131.6 of the Business and Professions Code.
(c) (1) This section shall apply to exchanges completed on or after January 1, 2026, for purposes of taxable years commencing on or after January 1, 2026.
(2) This section shall not apply to an exchange where the property to be disposed of by the taxpayer in the exchange is disposed of by that taxpayer on or before January 1, 2026, or where the property to be received by the taxpayer in the exchange is received by that taxpayer on or before January 1, 2026.
SEC. 3.
This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.