1031 Exchange Calculator
Estimate how much tax you can defer through a 1031 like-kind exchange.
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This calculator estimates how much tax you can defer by completing a 1031 like-kind exchange instead of selling your investment property outright. Here is how to use it:
- Enter the original purchase price. This is the price you paid for the property when you acquired it.
- Enter the current sale price. This is the price at which you plan to sell or have already sold the property.
- Set the capital gains tax rate. The federal long-term capital gains rate is typically 15% for most taxpayers, though it can be 0% or 20% depending on your income bracket. State taxes may apply on top.
- Set the depreciation recapture tax rate. The IRS taxes depreciation recapture at a maximum rate of 25%. This applies to the depreciation you claimed (or could have claimed) during ownership.
- Enter the number of years you owned the property. This is used to calculate total depreciation claimed.
- Enter your annual depreciation amount. For residential rental property, divide the building value (not land) by 27.5 years. The default assumes a $200,000 building value.
Results update instantly as you adjust any input. The green number shows how much tax you can defer by completing a qualifying 1031 exchange. Use the Share button to send this calculation to your CPA or financial advisor.
About 1031 Exchanges
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 and reinvest the proceeds into a "like-kind" replacement property. The exchange does not eliminate the tax. It defers it until you eventually sell without doing another exchange.
The two main tax components deferred are capital gains tax (on the profit from appreciation) and depreciation recapture tax (on the depreciation you claimed during ownership). Together, these can represent a significant portion of your sale proceeds, making 1031 exchanges one of the most powerful tax deferral strategies available to real estate investors.
All calculations run entirely in your browser. We never see or store your financial data.
Frequently Asked Questions
What is a 1031 exchange?
A 1031 exchange is a tax deferral strategy that allows you to sell an investment property and reinvest the proceeds into a new like-kind property without paying capital gains or depreciation recapture taxes at the time of sale. The tax is deferred, not eliminated. You will owe it when you eventually sell without doing another exchange, unless you hold the property until death (at which point heirs receive a stepped-up basis).
What are the requirements for a 1031 exchange?
Both the property you sell and the property you buy must be held for investment or business use (not personal residences). The replacement property must be of "like-kind," which for real estate is broadly defined and includes most types of real property. You must use a qualified intermediary to hold the funds during the exchange. The replacement property must be of equal or greater value, and you must reinvest all proceeds to defer the full tax amount.
What are the timeline rules for a 1031 exchange?
There are two critical deadlines. First, you must identify potential replacement properties within 45 days of selling your original property. Second, you must close on the replacement property within 180 days of the sale. These deadlines are strict and cannot be extended, even if they fall on weekends or holidays. Missing either deadline disqualifies the exchange.
What is "boot" in a 1031 exchange?
"Boot" is any value received in a 1031 exchange that is not like-kind property. This includes cash you take out of the exchange, debt reduction (if the new mortgage is smaller than the old one), or personal property included in the deal. Boot is taxable in the year of the exchange. To defer the full tax amount, you must reinvest all sale proceeds and take on equal or greater debt on the replacement property.