1031 Exchange Calculator
1031 Exchange Calculator
Property Sale Details
The original price you paid for the relinquished property
Real estate commissions, closing costs, and other selling expenses
Money spent on improvements that added to the property's value (added to your basis)
Total depreciation deductions claimed over your ownership period
Outstanding loan balance on the relinquished property at time of sale
Tax Rates
Your applicable long-term capital gains rate (0%, 15%, or 20%)
Your state's capital gains tax rate (0% for TX, FL, NV; varies for others)
Applies if your adjusted gross income exceeds $200k (single) or $250k (married)
Replacement Property
The price of the replacement property you plan to acquire
The loan amount you plan to take on the replacement property
Growth Projection
Assumed annual appreciation/return rate for investment growth projection
Enter Your Property Details
Fill in your property's purchase price, sale price, and tax information to see how much you could save with a 1031 exchange.
Important
This calculator is provided for general information only and is not financial, tax, or legal advice. Results are estimates and do not reflect your full circumstances, current rates, fees, or eligibility rules. Speak to a qualified professional before making a financial decision.
Estimate your capital gains tax deferral and savings from a like-kind property exchange
A 1031 exchange, named after Section 1031 of the Internal Revenue Code, allows real estate investors to defer paying capital gains taxes when they sell an investment property, provided they reinvest the proceeds into a like-kind replacement property. This powerful tax strategy has been used for decades to help investors grow their portfolios while preserving capital that would otherwise be lost to taxes. When you sell a rental property, commercial building, or other investment real estate at a profit, you typically owe federal capital gains tax (15% or 20%), state capital gains tax (varies by state), depreciation recapture tax (25% on accumulated depreciation), and possibly the 3.8% Net Investment Income Tax (NIIT) if your income exceeds certain thresholds. The combined tax bill can easily consume 25–40% of your gain. A properly executed 1031 exchange lets you defer all of these taxes indefinitely by rolling your equity into a new investment property. This calculator helps you quantify exactly how much you stand to save. Enter your property's purchase price, sale price, selling costs, capital improvements, and accumulated depreciation — along with your applicable tax rates — and the tool instantly shows your total tax liability with and without the exchange, the tax savings amount, and whether you risk triggering 'boot' (the taxable portion of proceeds not reinvested). The 1031 exchange process has strict IRS rules. You must identify up to three potential replacement properties within 45 days of closing on your relinquished property, and you must close on the replacement within 180 days. You cannot touch the sale proceeds yourself — they must flow through a Qualified Intermediary (QI). The replacement property must be of equal or greater value to fully defer all taxes; if you buy down in value or receive cash back, the difference is called 'boot' and is taxable. Beyond pure tax deferral, the reinvested tax savings compound over time. Our investment growth projection shows the future value of keeping those dollars working in real estate versus paying the tax bill today. Over a 20-year horizon, deferring a $100,000 tax payment at a 7% annual return creates over $386,000 in additional wealth. This compounding effect is why many sophisticated real estate investors chain multiple 1031 exchanges throughout their careers — sometimes referred to as a 'swap until you drop' strategy — with the intention of passing properties to heirs at a stepped-up basis, potentially eliminating the deferred gain entirely. This calculator is designed for educational and planning purposes. Always consult a qualified tax advisor, CPA, or 1031 exchange specialist before executing an exchange, as tax laws change and individual circumstances vary significantly.
Understanding 1031 Exchanges
What Is a 1031 Exchange?
A 1031 exchange (also called a like-kind exchange) is a tax-deferral strategy authorized by Section 1031 of the Internal Revenue Code. When you sell investment real estate and immediately reinvest the proceeds into another investment property of equal or greater value, the IRS allows you to defer paying capital gains taxes — including federal capital gains tax, state capital gains tax, depreciation recapture tax, and the Net Investment Income Tax (NIIT). The term 'like-kind' is broader than many investors realize: any real property held for investment or business use qualifies, whether residential rentals, commercial buildings, farmland, or industrial warehouses. Personal residences and 'fix-and-flip' properties do NOT qualify. Since the Tax Cuts and Jobs Act of 2017, only real property exchanges qualify; personal property exchanges (artwork, equipment, etc.) are no longer eligible.
How Are Taxes and Savings Calculated?
The calculation starts with your adjusted cost basis: original purchase price plus capital improvements minus accumulated depreciation. Your capital gain equals the net sale price (sale price minus selling costs) minus this adjusted basis. Without a 1031 exchange, you owe: federal capital gains tax (0%, 15%, or 20% based on your taxable income), depreciation recapture tax at 25% on all depreciation you've claimed, state capital gains tax (varies by state — from 0% in states like Florida and Texas to over 13% in California), and the 3.8% NIIT if your adjusted gross income exceeds $200,000 (single) or $250,000 (married filing jointly). With a full 1031 exchange, all of these taxes are deferred to zero — your tax savings equals the entire tax bill you would have paid.
Why the Tax Deferral Matters So Much
The power of 1031 exchanges comes from keeping your full equity working for you instead of paying a large chunk to the government. For example, if you sell a property for $800,000 with a $400,000 gain and face a combined tax rate of 35%, you'd owe $140,000 in taxes — reducing the capital available to reinvest to $660,000. With a 1031 exchange, you can reinvest the full $800,000. Over 20 years at 7% annual appreciation, $800,000 grows to approximately $3.1 million versus $2.5 million from the taxed amount — a difference of over $600,000. The 'swap until you drop' strategy chains multiple exchanges and can eventually eliminate deferred gains through the stepped-up basis that heirs receive at the investor's death.
Limitations and Important Caveats
This calculator provides estimates for planning purposes only and does not constitute tax advice. Key limitations include: tax rates change with legislation; state taxes vary widely and may have special rules; depreciation recapture calculations depend on the exact depreciation method used (straight-line vs. accelerated); the NIIT has phase-in rules that this tool simplifies; boot calculations depend on mortgage balances not captured in this basic version; and California and other states may not fully conform to federal 1031 rules. Additionally, 1031 exchanges involve significant legal and procedural requirements — improper execution can disqualify the exchange and trigger the full tax liability. Always work with a licensed Qualified Intermediary and consult a CPA or tax attorney before proceeding.
Formulas
Adjusted Cost Basis
Adjusted Basis = Purchase Price + Capital Improvements − Accumulated Depreciation
Your tax basis in the property, used to calculate your taxable gain.
Capital Gain
Capital Gain = (Sale Price − Selling Costs) − Adjusted Basis
The net taxable gain before applying tax rates.
Depreciation Recapture Tax
Recapture Tax = Accumulated Depreciation × 25%
Taxes the depreciation deductions you claimed at a flat 25% rate.
Total Tax Without Exchange
Total Tax = Federal CG Tax + Depreciation Recapture + State Tax + NIIT
The full tax bill if you sell without executing a 1031 exchange.
Boot (Partial Exchange)
Boot = max(Cash Not Reinvested, 0) + max(Old Debt − New Debt, 0)
The taxable portion of an exchange where you don't fully reinvest proceeds or reduce mortgage debt.
Investment Growth of Tax Savings
Future Value = Tax Savings × (1 + Annual Return)^Years
The compounded value of keeping tax savings invested instead of paying the tax bill.
Reference Tables
Federal Long-Term Capital Gains Tax Rates (2026)
Rates depend on your taxable income and filing status.
| Filing Status | 0% Rate | 15% Rate | 20% Rate |
|---|---|---|---|
| Single | Up to $47,025 | $47,026 – $518,900 | Over $518,900 |
| Married Filing Jointly | Up to $94,050 | $94,051 – $583,750 | Over $583,750 |
| Head of Household | Up to $63,000 | $63,001 – $551,350 | Over $551,350 |
Key 1031 Exchange Rules
IRS requirements for a valid like-kind exchange.
| Rule | Requirement |
|---|---|
| 45-Day Identification | Identify up to 3 replacement properties within 45 days of sale |
| 180-Day Closing | Close on replacement within 180 days of sale |
| Qualified Intermediary | Must use a QI — you cannot touch the proceeds |
| Equal or Greater Value | Replacement must be worth ≥ relinquished property to avoid boot |
| Equal or Greater Debt | New mortgage ≥ old mortgage (or add cash) to avoid mortgage boot |
| Like-Kind Property | Any real property for real property (post-TCJA 2017) |
| Investment/Business Use | Both properties must be held for investment or business use |
State Capital Gains Tax Rates (Selected States)
State rates vary widely — from 0% to over 13%.
| State | Rate | Notes |
|---|---|---|
| California | 13.3% | Highest in the nation — no preferential CG rate |
| New York | 10.9% | Plus NYC tax if applicable |
| New Jersey | 10.75% | No preferential CG rate |
| Oregon | 9.9% | No preferential CG rate |
| Minnesota | 9.85% | |
| Texas | 0% | No state income tax |
| Florida | 0% | No state income tax |
| Nevada | 0% | No state income tax |
| Washington | 7% | Capital gains tax enacted 2022 |
Worked Examples
Full 1031 Exchange — Complete Tax Deferral
Investor sells a rental duplex. Purchase price: $300,000. Capital improvements: $50,000. Accumulated depreciation: $80,000. Sale price: $800,000. Selling costs: $48,000 (6%). Federal rate: 20%. State rate: 5%. NIIT applies. Replacement property: $900,000.
Adjusted basis = $300,000 + $50,000 − $80,000 = $270,000
Net sale price = $800,000 − $48,000 = $752,000
Capital gain = $752,000 − $270,000 = $482,000
Federal CG tax = $482,000 × 20% = $96,400
Depreciation recapture = $80,000 × 25% = $20,000
State tax = $482,000 × 5% = $24,100
NIIT = $482,000 × 3.8% = $18,316
Total tax without exchange = $158,816
Replacement price $900,000 ≥ sale price $800,000 → No boot → Tax with exchange = $0
Tax savings: $158,816. Full $752,000 in net proceeds available to reinvest. At 7% annual return over 20 years, this deferral is worth an additional $432,000 in wealth.
Partial Exchange with Boot
Same property as above. Investor only reinvests $700,000 into replacement property (below sale price of $800,000). Existing mortgage: $200,000. New mortgage: $150,000.
Cash boot = $800,000 − $700,000 = $100,000 (did not reinvest full amount)
Mortgage boot = $200,000 − $150,000 = $50,000 (reduced debt)
Total boot = $100,000 + $50,000 = $150,000
Tax on boot ≈ $150,000 × (20% + 5% + 3.8%) = ~$43,200
Taxes still deferred = $158,816 − $43,200 = ~$115,616
By receiving boot, the investor owes $43,200 in taxes now but still defers $115,616. To avoid all boot, they should buy a property worth ≥ $800,000 and take on ≥ $200,000 in debt.
How to Use the 1031 Exchange Calculator
Enter Your Property Sale Details
Input your original purchase price, the sale price of the relinquished property, and your selling costs (agent commissions, closing costs, title fees). These determine your net sale proceeds and capital gain.
Add Basis Adjustments
Enter any capital improvements you made to the property (they increase your basis and reduce the gain) and the total accumulated depreciation you've claimed (which is subject to 25% recapture tax). Your existing mortgage balance helps calculate boot.
Set Your Tax Rates
Select your federal long-term capital gains rate (0%, 15%, or 20%) based on your income. Choose your state from the dropdown to auto-populate the state rate, or enter a custom rate. Check the NIIT box if your income exceeds $200k (single) or $250k (married).
Enter Replacement Property Details
Input the price of your planned replacement property and the new mortgage you'll take on. The calculator shows whether you'll trigger boot, the minimum replacement price to fully defer all taxes, and projects how your tax savings compound over 10, 20, or 30 years.
Frequently Asked Questions
What is 'boot' in a 1031 exchange and how is it taxed?
Boot refers to any cash or debt relief you receive that is NOT reinvested into the replacement property. There are two types: cash boot (when you receive cash back from the exchange, e.g., if you don't reinvest all your sale proceeds) and mortgage boot (when the debt on your new property is less than the debt relieved on your old property). Boot is taxable in the year of the exchange at your applicable capital gains and depreciation recapture rates. To avoid all boot — and achieve full tax deferral — your replacement property must be worth at least as much as the sale price of your relinquished property, and your new mortgage must be at least as large as your old mortgage (or you must contribute additional cash).
What are the 45-day and 180-day rules?
The IRS imposes strict timing deadlines on 1031 exchanges. From the date you close on your relinquished property, you have exactly 45 calendar days to formally identify up to three potential replacement properties in writing to your Qualified Intermediary. There are no extensions for weekends or holidays. You then have 180 calendar days from that same closing date to close on one of your identified replacement properties. These deadlines run simultaneously — you don't get 45 days plus 180 days; the 180-day clock starts at the same time as the 45-day clock. Missing either deadline disqualifies the exchange entirely, and the full tax liability becomes due for that year.
What is depreciation recapture and how does it affect my exchange?
Depreciation recapture is the IRS's way of clawing back the tax deductions you claimed for depreciation on your investment property. Over the years, you likely deducted a portion of the building's value each year as depreciation (typically over 27.5 years for residential rental property). When you sell, the IRS taxes that accumulated depreciation at a maximum rate of 25% — not at your regular long-term capital gains rate. A 1031 exchange defers depreciation recapture just like it defers regular capital gains. However, your adjusted basis in the replacement property is reduced by the deferred gain, meaning future depreciation deductions are based on a lower number.
Can I use a 1031 exchange for my primary residence?
No. A 1031 exchange applies only to property held for investment or productive use in a trade or business. Your primary residence does not qualify because it is personal property. However, there is a planning strategy where you convert a rental property to a primary residence before selling — but the IRS imposes strict rules: you must have owned the property for at least 5 years, used it as a rental for at least 2 of those 5 years, and then lived in it as your primary residence for at least 2 years. Even then, only part of the gain may be excluded under the Section 121 primary residence exclusion. This is a complex area requiring professional tax advice.
What is a Qualified Intermediary and why is it required?
A Qualified Intermediary (QI), also called an exchange accommodator or facilitator, is a third-party company that holds your sale proceeds between the sale of your relinquished property and the purchase of your replacement property. The IRS requires a QI because you — the taxpayer — cannot have actual or constructive receipt of the sale proceeds. If you touch the money even briefly, the exchange is immediately disqualified and the full tax is due. A reputable QI will also hold the proceeds in a segregated account and provide documentation. QI fees typically range from $800 to $2,500 per exchange. There is no licensing requirement for QIs at the federal level, so choosing a reputable, bonded, and insured company is essential.
What happens to my deferred taxes when I eventually sell without a 1031 exchange?
When you eventually sell a property and choose not to do another 1031 exchange, all of the previously deferred capital gains and depreciation recapture taxes become due in full. The deferred gain accumulates and is tracked through your adjusted basis in the property. Each time you do a 1031 exchange, your basis in the new property carries over from the old property (reduced by any deferred gain), which means future depreciation deductions are lower. Many investors use the 'swap until you drop' strategy: continuously exchanging into new properties throughout their lifetime and passing the properties to heirs at a stepped-up basis at death, which can permanently eliminate the deferred gain under current tax law.