Financial planning in Birmingham, AL: 1031 exchanges and retirement

I'm Scott Ward, CFP®, AIF®, AIFA®, SVP, Wealth Advisor at Compound Planning, based in Birmingham, Alabama. I work with real estate investors, business owners, physicians, executives, and families approaching or living in retirement, in person around the Birmingham area, and by video and phone with clients nationwide, including throughout the Southeast.

A 1031 exchange is a federal tax tool, so the rules are the same in Birmingham as anywhere else. What's local is the property you own, the Alabama tax rules that sit on top of the federal ones, and the professionals you'll work with. This page covers those local pieces.

Why do 1031 exchanges come up so often for Birmingham-area owners?

Many Birmingham-area investors have bought rental houses, duplexes, small offices, or retail buildings years ago and have held them ever since. A long holding period usually means two things: a large gain over the original purchase price, and a depreciated tax basis. When you sell, both can be taxed: federal capital gains tax, depreciation recapture of up to 25%, the 3.8% net investment income tax where it applies, and Alabama income tax.

Situations that often prompt the question:

• Landlords ready to step back. Owners who have managed rentals themselves for decades and want income without tenants, repairs, and late-night calls. Some exchange into net-leased property or Delaware Statutory Trusts; others decide to sell and pay the tax.
• Commercial and small-business property. Owners of office, retail, or industrial buildings who are selling a building, retiring from the business that occupies it, or both.
• Land, timber, and family acreage. Land held for investment around the metro area and across Alabama can generally be exchanged for income-producing property, or the reverse.
• Inherited and family-held property. Siblings or heirs deciding whether to keep, sell, or exchange a property together, and how that fits each person's plan.

The deadlines are strict: 45 days to identify replacement property and 180 days to close. Planning before you list is the most useful thing you can do. See the 1031 exchange guide for how the rules work.

What I help Birmingham-area investors decide

• Whether an exchange makes sense at all. For some sales, paying the tax and keeping flexibility is the better choice. I'll compare the options with you, with your CPA's tax estimate in hand.
• What to exchange into. Another property you manage, a net-leased building, one or more Delaware Statutory Trusts, or a mix, based on your goals for income, control, and diversification.
• How the exchange fits your retirement. Income needs, Social Security timing, debt, and the rest of your portfolio. See retirement planning.
• A backup plan for day 45. So a failed purchase doesn't turn into a surprise tax bill.
• Estate and family goals, including how heirs would inherit what you buy.

I'm not a qualified intermediary, CPA, attorney, or real estate broker, and I don't replace them. My role is to make sure the transaction serves your overall financial plan, and to keep everyone working from the same timeline.

How does Alabama tax a property sale or a 1031 exchange?

• Capital gains. Alabama taxes capital gains as ordinary income, at rates up to 5%, on top of the federal taxes above. Alabama generally follows federal like-kind exchange treatment, so a properly structured exchange can defer the Alabama tax along with the federal tax.
• Federal income tax deduction. Alabama is one of the few states that lets individuals deduct federal income tax paid on the state return, which affects the after-tax math of a sale.
• Non-resident sellers. Alabama generally requires withholding when non-residents sell Alabama real estate. Sellers completing a 1031 exchange can generally claim an exemption using Alabama Form NR-AF3. If you live out of state and are selling Alabama property, raise this with your closing attorney and QI early.
• Property types. Alabama exchanges often involve timberland, farmland, and hunting land as well as rentals and commercial buildings. Real property held for investment can generally be exchanged for other investment real estate.

This is a simplified summary of federal and Alabama rules as of 2026. Rules change, and how they apply depends on your situation. Confirm the details with your CPA and attorney before acting. Sources: Alabama Department of Revenue, individual income tax rates and income to be reported.

What should you know about retiring in the Birmingham area?

Alabama's tax rules for retirees differ from many states, which matters whether you've lived here for decades or are moving to be closer to family.

• Social Security benefits are not taxed by Alabama.
• Pensions. Income from qualified defined benefit pension plans, including many government and military pensions, is generally exempt from Alabama income tax.
• IRAs and 401(k)s. Withdrawals are generally taxable in Alabama, but residents age 65 and older can generally exclude up to $6,000 a year of that retirement income.
• Property tax. Homeowners 65 and older are generally exempt from the state portion of property tax on their home; local exemptions vary by county and city, including in Jefferson County and Shelby County.

The bigger questions are the same ones retirees face anywhere: how much income your savings and property can support, when to claim Social Security, how to draw from accounts in a tax-aware order, and what to do with rental property you no longer want to manage. See retirement planning for how I approach them.

Alabama retirement tax rules summarized as of 2026; confirm your situation with your CPA.

Where I meet with clients around Birmingham

I'm based in Birmingham and meet clients in person across the metro area. Here are the areas I serve most often:

Birmingham

Southside and neighborhoods across the city. Southside is home to UAB, and physicians and other medical professionals often have questions about retirement plans, savings, and investment property.

Over the Mountain

Mountain Brook (including Crestline Village, English Village, and Lane Parke), Homewood, Vestavia Hills (including Cahaba Heights and Liberty Park), and Hoover. For families who own long-held rental houses or commercial property alongside their retirement savings, this is where exchange and retirement planning meet.

U.S. 280 corridor and Shelby County

Inverness, Greystone, Chelsea, Pelham, Helena, Alabaster, and the rest of Shelby County. Planning questions here can include business owners and executives preparing for retirement, and families who have moved to the area and still own property elsewhere.

East and north of Birmingham

Trussville, Irondale, Leeds, and Gardendale. Owners here may hold land and acreage as well as rentals, which raises the question of whether to exchange land into income-producing property.

Not in the Birmingham area? Birmingham is my home base, and I work with clients nationwide, including throughout the Southeast, by video and phone. Compound Planning works with clients nationwide where it is registered or exempt from registration.

How working together usually goes

1. An introductory call about the property, your timeline, and what you want next.
2. A planning review of your income, assets, taxes (with your CPA), and estate goals.
3. Coordination with your qualified intermediary, agent, and CPA, so the exchange is set up before closing.
4. Replacement options, including a backup, evaluated before your 45-day window opens.
5. Ongoing planning after the exchange, for income, investments, and the next decision.

Learn the rules first

If you're early in the process, start with the complete 1031 exchange guide and the guide to Delaware Statutory Trusts. For a Birmingham QI, agent, or CPA, here's how I work with referral partners. You can also read my U.S. News articles on real estate, taxes, and retirement.

Scott Ward and Compound Planning do not act as qualified intermediaries. See the disclosures below.