1031 exchange calculator
Estimate what a 1031 exchange defers when you sell a rental and buy another. Enter what you paid, your improvements and depreciation, the sale and the replacement. The results show the gain on the sale, the boot taxed now, the gain and tax you defer and the basis you carry into the new property.
Your results
EstimateGain deferred: $210,000.00
- Estimated tax deferred
- $52,500.00
- Gain on the sale
- $224,000.00
- Boot (taxed now)
- $14,000.00
- Gain taxed now
- $14,000.00
- Estimated tax due now
- $3,500.00
- Adjusted basis of the property you sell
- $340,000.00
- Basis of the replacement property
- $540,000.00
- The boot is $14,000.00 of cash you keep, so $14,000.00 of the gain is taxed now. To defer all of it, buy a replacement that costs at least $564,000.00, put all $364,000.00 of your equity into it, and replace the loan you paid off with a new loan or added cash.
- An estimate at one combined rate. An exchange only works with real property held for investment or business use, a qualified intermediary holding the sale proceeds, the replacement named within 45 days and bought within 180 days. Ask a tax professional before you sell.
Results are estimates for planning only. They are not legal, tax or investment advice, and they apply no state or local rules. Check your lease, your local laws and a qualified professional before you rely on a number.
How a 1031 exchange is calculated
Gain = (sale price - selling costs) - adjusted basis; taxed now = the boot, up to the gain; deferred = gain - taxed now
The gain starts from the adjusted basis of the property you sell: what you paid, including purchase costs, plus improvements, less the depreciation taken. With $400,000 of cost, $30,000 of improvements and $90,000 of depreciation, the adjusted basis is $400,000 + $30,000 - $90,000 = $340,000. The gain is the sale price less selling and exchange costs, less that basis.
Boot is what you take out of the exchange. Cash boot is equity you keep: the sale less selling costs and the loan paid off, less the down payment on the replacement. Mortgage boot is debt you shed: the loan paid off, less the new loan and any cash you add. Taking on a bigger loan offsets mortgage boot, and it never offsets cash you keep. The gain is taxed now up to the boot, and the rest is deferred.
The deferred gain carries into the replacement property: its basis is its price less the deferred gain, so it has less basis to depreciate and a larger gain when you sell it later without an exchange. The calculator taxes the gain at one combined rate you enter. It is general information and is not tax advice, so plan an exchange with a tax professional and a qualified intermediary before you sell.
Worked example
You bought a rental for $400,000 including purchase costs, added $30,000 of improvements and took $90,000 of depreciation. You sell it for $600,000, pay $36,000 in selling and exchange costs and pay off a $200,000 loan. You buy a $750,000 replacement with a $400,000 loan. Your combined tax rate on the gain is 25%.
- Adjusted basis: $400,000 + $30,000 - $90,000 = $340,000.
- Amount realized: $600,000 - $36,000 = $564,000.
- Gain on the sale: $564,000 - $340,000 = $224,000.
- Cash boot: your equity is $564,000 - $200,000 = $364,000, the down payment is $750,000 - $400,000 = $350,000, so you keep $14,000.
- Mortgage boot: the $400,000 new loan is more than the $200,000 paid off, so $0.
- Gain taxed now: the $14,000 of boot. Gain deferred: $224,000 - $14,000 = $210,000.
- Tax at 25%: $3,500 now and $52,500 deferred.
- Replacement basis: $750,000 - $210,000 = $540,000.
The gain deferred is $210,000.00, with an estimated $52,500.00 of tax deferred and $3,500.00 due now on $14,000.00 of boot.
Frequently asked questions
What is a 1031 exchange?
Section 1031 of the tax code lets you sell real property held for investment or business use and buy other real property without paying tax on the gain at the time, as long as the exchange follows the rules. The gain is deferred into the new property and taxed when you later sell without another exchange.
What is boot in a 1031 exchange?
Boot is value you take out of the exchange: cash you keep, or debt you shed without replacing it. It is taxed now, up to the gain. In the worked example, buying a $500,000 replacement with a $150,000 loan instead leaves $14,000 of cash boot and $50,000 of mortgage boot, so $64,000 of the gain is taxed now.
What are the 45-day and 180-day rules?
You have 45 days from the sale to identify the replacement property in writing, and you must buy it within 180 days of the sale or by the due date of your tax return for that year, including extensions, if that comes first. A qualified intermediary holds the sale proceeds in between; taking the cash yourself can end the exchange.
Does a 1031 exchange defer depreciation recapture?
Yes, the deferred gain includes the gain from depreciation you took. It carries into the replacement through its lower basis. When you sell the replacement later without an exchange, the recapture and the rest of the gain are taxed then.
What property qualifies for a 1031 exchange?
Real property you hold for investment or for use in a business, exchanged for other real property you will hold the same way. Your own home does not qualify, and neither does property you hold mainly to resell, such as a quick flip. Property in the United States and property abroad are not like-kind. A tax professional can confirm whether yours qualifies.
Keep the records your exchange will need
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