1031 Exchange Calculator
🔄 1031 Exchange rules: Defer capital gains and depreciation recapture by reinvesting sale proceeds into like-kind property. Boot (cash or non-like-kind property received) is taxable.
💡 Pro tip: To fully defer tax, you must (1) reinvest all net proceeds, (2) purchase property of equal or greater value, and (3) identify replacement property within 45 days, close within 180 days. Consult a qualified intermediary and tax professional.
How to Use This 1031 Exchange Calculator
A 1031 exchange lets you defer federal capital gains taxes when you sell an investment property — as long as you reinvest the proceeds into a qualifying replacement property. This calculator runs the numbers so you can see exactly how much tax you’d owe without an exchange, how much you stand to defer, and whether your deal triggers any boot tax.
Here’s how to use it in three steps.
Step 1 — Enter Your Sale Details
Start with the basics of your relinquished property (the one you’re selling): the sale price, your selling costs (commissions, closing fees), and any outstanding mortgage balance. The calculator uses these to determine your net equity — the amount you need to reinvest to avoid boot.
Step 2 — Input Your Basis and Depreciation
Your adjusted basis is what you originally paid for the property, plus any capital improvements, minus any depreciation you’ve claimed over the years. If you’ve owned the property for several years, your basis is likely much lower than the purchase price because of depreciation. Enter the total depreciation you’ve claimed — this figure gets taxed separately at 25% regardless of your exchange.
Step 3 — Review Your Results
The calculator outputs five numbers that matter:
- Total tax without exchange — the combined federal capital gains tax, depreciation recapture, and NIIT you’d owe if you sold today without a 1031
- Tax deferred — how much you save by completing the exchange
- Boot tax owed — any tax triggered by receiving cash or failing to match your debt load
- Minimum replacement property price — the threshold you must hit to defer 100% of your gain
- 45-day and 180-day deadlines — calculated from your sale close date
What Is a 1031 Exchange?
A 1031 exchange — named after Section 1031 of the Internal Revenue Code — is a tax deferral strategy that allows real estate investors to sell an investment property and reinvest the proceeds into a like-kind replacement property without paying capital gains tax at the time of sale. The taxes aren’t eliminated; they’re deferred until you eventually sell the replacement property outside of an exchange.
The strategy has been used by real estate investors for over a century. Real estate held for investment or business purposes almost always qualifies. Your primary residence does not.
How to Calculate a 1031 Exchange — Step by Step
Understanding the math behind a 1031 exchange helps you spot problems before they become tax bills. Here’s the complete calculation framework.
The 1031 Exchange Formula
Realized Gain = Sale Price − Adjusted Basis − Selling Costs
Adjusted Basis = Original Purchase Price + Capital Improvements − Accumulated Depreciation
Tax Without Exchange = (Capital Gain × Your Capital Gains Rate) + (Depreciation Recapture × 25%) + NIIT (if applicable)
Boot = Net Proceeds Received − Amount Reinvested into Replacement Property
For a full tax deferral, you must reinvest all net equity and replace your mortgage debt (or pay down the difference with additional cash).
Worked Example: $750,000 Property Sale
Let’s walk through a complete calculation using a consistent example you can follow throughout this page.
Property details:
- Sale price: $750,000
- Original purchase price: $300,000
- Capital improvements: $50,000
- Depreciation claimed over 12 years: $80,000
- Selling costs (commissions + closing): $45,000
- Mortgage payoff: $200,000
- Filing status: Married filing jointly
- Taxable income: $250,000 (above 15% threshold)
Step 1 — Calculate adjusted basis: $300,000 + $50,000 − $80,000 = $270,000 adjusted basis
Step 2 — Calculate realized gain: $750,000 − $270,000 − $45,000 = $435,000 realized gain
Step 3 — Split the gain:
- Capital gain portion: $435,000 − $80,000 depreciation recapture = $355,000
- Depreciation recapture: $80,000
Step 4 — Calculate taxes without exchange:
- Capital gains tax (15% rate): $355,000 × 15% = $53,250
- Depreciation recapture tax (25%): $80,000 × 25% = $20,000
- NIIT check: Net investment income over $250,000 MFJ threshold? Yes → 3.8% on $185,000 = $7,030
- Total tax bill without exchange: $80,280
Step 5 — Net equity to reinvest: $750,000 − $45,000 − $200,000 = $505,000 net equity
To avoid boot, the replacement property must be purchased for at least $750,000 (matching sale price) and the investor must carry at least $200,000 in new debt or cover the difference with additional cash.
How to Calculate Your Adjusted Basis
Your adjusted basis is the starting point for every 1031 calculation, and it’s often where investors make mistakes.
Start with your original purchase price. Add every dollar you spent on capital improvements — additions, structural upgrades, roof replacements, new HVAC systems. Do not include routine repairs and maintenance; those are operating expenses, not basis additions.
Then subtract every dollar of depreciation you’ve claimed on your tax returns. Residential rental property depreciates over 27.5 years; commercial property over 39 years. If you’ve owned the property for 10 years and claimed $8,000 in depreciation annually, your basis is reduced by $80,000.
If you acquired the property through a prior 1031 exchange, your basis carries forward from the original property. This is called carryover basis and it means a string of exchanges doesn’t reset the depreciation clock — it accumulates.
What Is Boot in a 1031 Exchange? (And How to Calculate It)
Boot is the portion of a 1031 exchange that doesn’t qualify for tax deferral. It’s the most common reason investors end up with an unexpected tax bill after what they thought was a clean exchange.
Boot comes in two forms: cash boot and mortgage boot.
Cash boot is straightforward: if you receive cash from the sale — whether directly or because you pocketed money before the exchange — that cash is taxable.
Mortgage boot is trickier. If your replacement property carries less debt than your relinquished property, the difference counts as boot. You can offset mortgage boot by paying additional cash into the replacement property, but you cannot offset cash boot with additional debt.
Boot Tax Formula
Boot Amount = (Net proceeds from sale) − (Amount reinvested in replacement property)
Boot Tax = Boot Amount × Your Applicable Capital Gains Rate
The boot amount is taxed at your long-term capital gains rate (0%, 15%, or 20% depending on income) — not as ordinary income, unless the boot consists of depreciation recapture, which is always taxed at 25%.
Partial 1031 Exchange Boot Calculation Example
Using our $750,000 sale example above:
Scenario: The investor buys a replacement property for $680,000 (instead of the full $750,000 needed for zero boot) with a $200,000 mortgage.
- Net proceeds from sale: $505,000
- Amount reinvested: $680,000 − $200,000 mortgage = $480,000 cash
- Boot: $505,000 − $480,000 = $25,000
- Boot tax at 15%: $25,000 × 15% = $3,750 owed on boot
The investor still defers the remaining $76,530 in taxes — a partial exchange is still far better than a full taxable sale.
How to Avoid Boot
The cleanest way to avoid boot is to purchase a replacement property worth at least as much as your sale price and carry equal or greater debt. If your replacement property costs less, you can contribute additional cash to close the gap. Work with your qualified intermediary early to identify the exact equity and debt targets before you go under contract on the replacement property.
Depreciation Recapture in a 1031 Exchange
Every year you own a rental property, you claim depreciation as a tax deduction. The IRS gives this benefit, and it takes it back when you sell — at a flat 25% rate called the depreciation recapture tax (sometimes called Section 1250 unrecaptured gain).
Here’s the critical point: a 1031 exchange defers depreciation recapture. It does not eliminate it. If you do a series of 1031 exchanges over your lifetime, you’re carrying forward a growing deferred depreciation recapture liability. Many investors use a “swap till you drop” strategy, planning to hold their final property until death, at which point heirs receive a stepped-up basis that wipes the deferred tax obligation.
How Depreciation Recapture Is Taxed (2026)
Depreciation recapture on real estate is taxed at a maximum rate of 25%, regardless of your income bracket. This is separate from your capital gains rate and applies only to the portion of your gain attributable to depreciation you previously deducted.
Using our $750,000 example: the $80,000 in claimed depreciation is recaptured at 25%, generating an $20,000 tax. This amount is included in the calculator’s “Tax Without Exchange” output and deferred along with the rest when you complete a valid exchange.
Depreciation After a 1031 Exchange
Your depreciation schedule on the replacement property uses your carryover basis — not the purchase price of the new property. This means you’ll have two depreciation schedules running simultaneously:
- Carryover basis depreciation: Your basis from the relinquished property continues to depreciate on its original schedule
- Excess basis depreciation: Any amount you paid above carryover basis depreciates on a fresh 27.5-year or 39-year schedule
The IRS requires you to split these two components and track them separately. Your CPA handles this, but understanding it helps you see why depreciation recapture grows larger with every exchange cycle.
45-Day and 180-Day Deadline Calculator
Every 1031 exchange operates on two hard deadlines set by the IRS. Miss either one and your exchange fails — you’ll owe all the taxes you were trying to defer, often in the same tax year as the sale.
The 45-Day Identification Period: From the date your relinquished property closes, you have exactly 45 calendar days to identify potential replacement properties in writing. No extensions. No exceptions. Weekends and holidays count.
The 180-Day Exchange Period: You must close on your replacement property within 180 calendar days of your relinquished property closing — or by your tax filing deadline for that year (including extensions), whichever comes first.
Use the deadline calculator embedded above to enter your sale close date and instantly see both deadlines. Save the output or screenshot it — your qualified intermediary will track these dates, but so should you.
What happens if you miss the 45-day deadline? The exchange is disqualified. You cannot identify a property on day 46. Plan your identification strategy before you close on the sale — not after.
A note on identification rules: You can identify up to three potential replacement properties regardless of value (the “3-property rule”), or any number of properties whose combined value doesn’t exceed 200% of your relinquished property’s value (the “200% rule”). You don’t need to close on all identified properties — just at least one.
2026 Capital Gains Tax Rates
The calculator applies 2026 federal tax rates automatically based on your filing status and taxable income. Here’s the rate structure this calculator uses:
| Rate | Single Filer | Married Filing Jointly |
|---|---|---|
| 0% | Up to $47,025 | Up to $94,050 |
| 15% | $47,026 – $518,900 | $94,051 – $583,750 |
| 20% | Over $518,900 | Over $583,750 |
Depreciation Recapture Rate: 25% (flat, all income levels)
Net Investment Income Tax (NIIT): An additional 3.8% applies to net investment income for taxpayers with modified adjusted gross income (MAGI) over $200,000 (single) or $250,000 (married filing jointly). Most real estate investors with significant property sales will trigger NIIT.
State Capital Gains Taxes: These vary widely. California taxes capital gains as ordinary income (up to 13.3%). Texas and Florida have no state income tax, making exchanges in those states significantly more attractive. Use the state dropdown in the calculator to apply your state’s rate. For a deeper look at how California handles 1031 exchanges — including its clawback provision for replacement properties moved out of state — see our California 1031 exchange guide.
1031 Exchange vs. Selling — Side-by-Side Comparison
The numbers are clearer when you see them together. Using our $750,000 example:
| Scenario | After-Tax Proceeds Available to Reinvest |
|---|---|
| Taxable Sale (no exchange) | $505,000 − $80,280 tax = $424,720 |
| 1031 Exchange (full deferral) | $505,000 − $0 tax = $505,000 |
| Advantage of Exchange | $80,280 more capital working for you |
That $80,280 in deferred tax isn’t just money you didn’t spend — it’s capital that can be deployed into a larger replacement property, increasing both your income and your long-term appreciation base. Over multiple exchange cycles, this compounding effect is substantial.
This is why the strategy matters: it’s not just tax avoidance. It’s a legal mechanism to keep your full equity working in real estate rather than sending a check to the IRS.
Frequently Asked Questions
Can I do a partial 1031 exchange?
Yes. A partial exchange means you reinvest some but not all of your proceeds, intentionally receiving boot on the portion you keep. You’ll owe taxes on the boot amount, but the remainder of your gain is still deferred. Use the calculator’s boot field to see exactly what you’d owe before making this decision.
Can I download the 1031 exchange calculator as an Excel worksheet?
The calculator runs in your browser and produces real-time results — no download required. If you need to share or archive your results, you can print the results page to PDF. We don’t currently offer an Excel version, but a printable worksheet with all inputs and outputs is available from the results screen.
How do I calculate my new basis after a 1031 exchange?
Your new basis in the replacement property equals your adjusted basis in the relinquished property, plus any additional cash you contributed, minus any boot you received. If you received no boot and contributed no additional cash, your basis in the new property equals your old adjusted basis — even if the replacement property cost significantly more.
Formula: New Basis = Old Adjusted Basis + Additional Cash Paid − Boot Received
Do I need a qualified intermediary (QI) for a 1031 exchange?
Yes, for virtually all exchanges. Under IRS rules, you cannot constructively receive or control the sale proceeds between the sale and the purchase. A qualified intermediary holds the funds and facilitates the transfer. Without one, the exchange fails automatically. QI fees typically run $750–$1,500 for a standard delayed exchange.
What is the minimum property value for a 1031 exchange?
There is no minimum — the IRS sets no dollar floor. However, given QI fees and the administrative complexity, exchanges are typically worthwhile when the deferred tax liability exceeds $10,000–$15,000. Run the calculator to check your specific numbers.
Does a 1031 exchange work in California?
Yes, with a significant caveat: California does not conform to the federal like-kind exchange rules for out-of-state replacement properties. If you exchange a California property for a property in another state, California requires you to file an annual informational return tracking the replacement property. When you eventually sell (outside of an exchange), California will claim its capital gains tax regardless of where the replacement property is located. This is known as California’s “clawback” provision.
What happens if I receive cash boot?
Cash boot is taxable in the year of the exchange. You’ll receive a Form 1099-S from your settlement agent, and your QI should provide a written accounting of the exchange. Report the taxable boot on Schedule D and Form 8824 (Like-Kind Exchanges). Your CPA handles this — but understanding it means no surprises at tax time.
How long do I have to hold the replacement property?
The IRS doesn’t specify a minimum holding period, but the general guidance is that the property must be held for investment or business use. Many tax advisors recommend at least one to two years of continued investment use before converting the property. Converting a 1031 replacement property to a primary residence requires at least five years of ownership and two years of investment use before the primary residence exclusion ($250K/$500K) applies.
Is the calculator free to use?
Yes, completely free. No account required, no data stored.
Should I consult a CPA before doing a 1031 exchange?
Yes, without exception. This calculator estimates your tax deferral based on inputs you provide — it’s a planning tool, not tax advice. A 1031 exchange has strict rules, hard deadlines, and real consequences for errors. Work with a CPA who specializes in real estate transactions and a qualified intermediary before you close on your sale.
Related Calculators
Once you’ve run your 1031 exchange numbers, these tools help you evaluate the replacement property side of the deal:
- Rental Property Cash Flow Calculator — model NOI and cash-on-cash return for your replacement property
- DSCR Calculator — check loan eligibility based on debt service coverage ratio
- Seller Financing Calculator — model seller-carry scenarios for the replacement property purchase
- California Capital Gains Tax Calculator — calculate state taxes if your property is in California
This calculator is provided for planning purposes only and does not constitute tax, legal, or financial advice. Tax laws change and individual circumstances vary. Consult a licensed CPA or tax attorney before making any decisions based on these calculations. Last reviewed: May 2026.