1031 Exchange Calculator
Calculate how much in capital gains and depreciation recapture taxes you can defer with a like-kind 1031 exchange — and what happens if you receive boot.
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Taxes Deferred via 1031 Exchange
$82,500
Full deferral — replacement property meets or exceeds sale price
Capital Gain
$400,000
Depreciation Recapture Tax
$12,500
Tax Without 1031
$82,500
Boot (Taxable Portion)
None
Min. Replacement Price
$600,000
Net Proceeds (1031 vs Sale)
$600,000 vs $517,500
Key 1031 rules: 45 days to identify replacement property · 180 days to close · Must be like-kind investment property · Consult a qualified intermediary and tax advisor.
How to Use This 1031 Exchange Calculator
Enter five values to see how much tax you can defer:
- Sale Price: What you're selling your investment property for.
- Adjusted Cost Basis: Your original purchase price, plus improvements, minus depreciation already taken. This is your tax basis — the lower it is, the larger your capital gain.
- Total Depreciation Taken: Cumulative depreciation deductions claimed over your ownership period. Taxed at 25% upon sale (depreciation recapture). In a 1031, this is also deferred.
- Capital Gains Tax Rate: Your applicable long-term capital gains rate: 0%, 15%, or 20% depending on your income. Add 3.8% NIIT if applicable for high earners.
- Replacement Property Price: What you'll pay for your new investment property. Must equal or exceed sale price to avoid boot (taxable gain).
How 1031 Exchange Tax Deferral Works
Capital Gain = Sale Price − Adjusted Basis
Depreciation Recapture Tax = Depreciation × 25%
Capital Gains Tax = (Capital Gain − Depreciation) × CG Rate
Total Tax Without 1031 = Recapture Tax + CG Tax
Boot = MAX(0, Sale Price − Replacement Price)
Boot Tax = Boot × Capital Gains Rate
Deferred Tax = Total Tax − Boot Tax
Depreciation Recapture Tax = Depreciation × 25%
Capital Gains Tax = (Capital Gain − Depreciation) × CG Rate
Total Tax Without 1031 = Recapture Tax + CG Tax
Boot = MAX(0, Sale Price − Replacement Price)
Boot Tax = Boot × Capital Gains Rate
Deferred Tax = Total Tax − Boot Tax
In a full 1031 exchange (no boot), you defer ALL taxes by rolling equity into a replacement property of equal or greater value. The taxes aren't forgiven — they carry forward into the new property's basis. You only pay when you eventually sell without exchanging again.
The Key Time Rules
- 45-day identification period: Identify up to 3 replacement properties within 45 days of selling.
- 180-day closing period: Must close on the replacement property within 180 days of selling (or your tax filing deadline, whichever comes first).
- Qualified Intermediary (QI): Proceeds must be held by a QI — never touch the money yourself or it becomes immediately taxable.
Example: Deferring $120,000 in Taxes
Patricia's Rental Property Exchange
Patricia bought a rental duplex for $250,000 in 2010 and sells for $600,000 in 2025. She has taken $50,000 in depreciation. Her income puts her in the 20% long-term capital gains bracket.
| Sale Price | $600,000 |
| Adjusted Basis | $200,000 |
| Total Depreciation | $50,000 |
| Capital Gain | $400,000 |
| Depreciation Recapture (25%) | $12,500 |
| Capital Gains Tax (20%) | $70,000 |
| Total Tax Without 1031 | $82,500 |
| Replacement Property | $750,000 apartment building |
| Boot | $0 (replacement exceeds sale) |
| Total Tax Deferred | $82,500 |
Patricia defers $82,500 in taxes and rolls all $600,000 into a larger income-producing property, compounding her wealth tax-deferred. If she holds until death, heirs receive a stepped-up basis and may never pay these taxes.
Frequently Asked Questions
A 1031 exchange (also called a like-kind exchange) is a tax strategy under IRS Section 1031 that allows real estate investors to sell an investment property and defer capital gains taxes by reinvesting in another like-kind property within specific time limits. It's one of the most powerful wealth-building tools in real estate.
Both the relinquished and replacement properties must be held for investment or productive use in a trade or business. This includes rental properties, commercial buildings, land, and even vacation rentals used as investment properties. Primary residences do NOT qualify. "Like-kind" is broadly defined — you can swap a duplex for a warehouse, or farmland for an apartment complex.
When you die holding 1031-exchanged property, your heirs receive a stepped-up basis to fair market value at the time of your death. This eliminates all deferred capital gains taxes permanently — they're never paid. This makes 1031 exchanges a powerful generational wealth strategy when combined with estate planning.
Boot is the taxable portion of a 1031 exchange — any proceeds you receive or fail to reinvest. This occurs when: you buy a replacement property for less than the sale price, you take cash out at closing, you take on less debt in the new property, or you pay costs with exchange funds that aren't valid closing costs. Boot is taxed in the year of the exchange at capital gains rates.
Yes, for a standard deferred 1031 exchange. A Qualified Intermediary (QI) — also called an exchange accommodator or facilitator — must hold the sale proceeds between transactions. If you receive or control the funds at any point, the exchange fails and all taxes become due immediately. QI fees typically run $800-$1,500 per transaction.