1031 Exchange Calculator
Compute capital gains + depreciation recapture tax if you sell vs defer via 1031 exchange. See the tax savings + boot exposure. Free, no signup.
1031 Exchange Calculator
IRC Section 1031 ("like-kind exchange") lets you sell investment real estate AND buy replacement property without paying federal capital gains + depreciation recapture — DEFERRED indefinitely. The tool computes the tax you'd owe on a straight sale, the boot exposure on a partial 1031, and the tax savings of a clean exchange.
If you sell outright
If you 1031 exchange
How to Use the 1031 Calculator
Calculate your adjusted basis
Original purchase price + capital improvements − cumulative depreciation taken. Don't forget improvements (renovation, addition, new roof) — they raise basis. Get this number from your prior tax returns or a CPA.
Set the replacement property at-or-above the sale price
For a clean 1031 (no boot), the replacement property must be EQUAL or GREATER value than what you sold, AND you must carry equal-or-greater debt. Going down in either dimension creates "boot" — taxable income in the year of the exchange.
Engage a Qualified Intermediary (QI)
You CANNOT touch the proceeds yourself — they must flow through a QI (escrow company specializing in 1031s). Common QIs: IPX1031, First American Exchange, Asset Preservation. QI fees: USD 750-USD 1,500. Cheap insurance vs the tax cost of a botched 1031.
Watch the 45/180 day deadlines
45 days from sale closing: identify up to 3 replacement properties in writing. 180 days from sale closing: close on at least one. These deadlines are inflexible — IRS does not grant extensions except for federally-declared disasters. Plan replacement IDENTIFICATION before listing the relinquished property if possible.
1031 Exchange — The US Real Estate Investor's Permanent Tax Deferral
What 1031 Defers — and What It Doesn't
Section 1031 of the Internal Revenue Code lets you defer federal capital gains tax + depreciation recapture when selling an investment property AND buying a like-kind replacement of equal-or-greater value. "Like-kind" is broadly interpreted in real estate — almost any US real estate held for investment qualifies as like-kind to any other US real estate held for investment. So you can 1031 from a single-family rental into a commercial multifamily, raw land into an apartment building, etc. What's NOT eligible: primary residences (use §121 exclusion instead), inventory, stocks/securities, foreign real estate.
Critical point: 1031 is DEFERRAL, not elimination. The deferred tax follows the replacement property — when you eventually sell without doing another 1031, the entire accumulated gain becomes due. However, taxpayers who hold property until death receive a stepped-up basis (asset transfers to heirs at fair market value, eliminating the deferred gain entirely). This "1031 + step-up at death" combination is the most powerful US real-estate wealth-building strategy — defer tax indefinitely during life, then heirs inherit tax-free.
The Boot Trap
"Boot" is any value received in the exchange that's NOT like-kind real estate. Two main types: cash boot (you receive cash at closing — perhaps because the replacement is cheaper than you sold), debt boot (your new mortgage is smaller than the old one — IRS views the difference as cash equivalent received). Boot is taxable in the year of the exchange to the extent of total realized gain. To get a clean 1031: buy replacement of equal-or-greater value AND carry equal-or-greater debt. Reinvesting all equity is necessary but not sufficient — debt also has to match-or-exceed.
Common boot scenarios: (1) selling a USD 650K property and buying USD 600K replacement → USD 50K cash boot, taxable; (2) selling with USD 180K mortgage and buying with USD 120K new mortgage → USD 60K debt boot, taxable. Both can be avoided by buying a more expensive replacement OR adding cash to bridge the gap. The tool above models both scenarios so you can size the replacement correctly to minimize boot.
"The 1031 + step-up-at-death combination: defer capital gains tax indefinitely through serial exchanges, then heirs inherit at fair-market-value basis — eliminating the entire deferred gain. This single tax planning approach has built more multigenerational US real estate wealth than any other strategy."
Timing — The 45/180 Day Cliff
45-Day Identification Rule: within 45 days of the relinquished property's sale closing, you must identify (in writing, delivered to the QI) the potential replacement properties. Three options: (a) up to 3 properties of any value; (b) any number of properties whose combined value is ≤ 200% of sale price; (c) any number of properties IF you ultimately acquire 95% of their combined value (rarely used). 180-Day Closing Rule: must close on the replacement within 180 days of relinquished sale closing. Both are calendar days, not business days. Both deadlines are inflexible — only narrow exceptions for federally-declared disasters. Plan the replacement search BEFORE listing the relinquished property; many failed 1031s are caused by insufficient time to find suitable replacement.
10 Facts About US 1031 Exchanges
IRC §1031: defer federal cap gains + depreciation recapture when exchanging investment real estate.
45-day identification + 180-day close — inflexible deadlines from sale closing.
Must use a Qualified Intermediary (QI) — you can't touch the proceeds. QI fees USD 750-USD 1,500.
Federal cap gains rate: 0% (income under USD 47K single), 15% (most middle income), 20% (above USD 519K).
Depreciation recapture: 25% federal rate, applied to all depreciation previously taken.
NIIT: 3.8% additional tax on investment income for high earners (MAGI above USD 200K single / 250K joint).
"Boot" = value received that's NOT like-kind real estate. Triggers immediate tax up to the realized gain.
Replacement must be EQUAL or GREATER value AND have equal-or-greater debt to avoid boot.
Step-up at death eliminates deferred gain — the "1031 forever" wealth strategy.
TCJA 2018 limited 1031 to real property only — personal property (equipment, vehicles, art) no longer eligible.
Frequently Asked Questions
- Almost any US real estate held for investment or business use is "like-kind" to any other US real estate held for investment. Single-family rental → multifamily? Yes. Raw land → office building? Yes. Apartments → retail strip mall? Yes. NOT like-kind: primary residence (use §121 exclusion instead), inventory/flip property (held primarily for resale), stocks, securities, foreign real estate. Personal property (equipment, vehicles, art) was disqualified by TCJA 2018.
- IRS requires that the seller never "constructively receives" the sale proceeds — otherwise it's a taxable sale, not a 1031. A QI is an independent third party who holds the funds in escrow between the sale closing and the replacement purchase closing. You can never touch the money or instruct disbursement except to the replacement property. QI must be engaged BEFORE the relinquished property sale closing — engaging one after the sale invalidates the 1031.
- The 1031 fails and the sale becomes fully taxable. No grace period except for federally-declared disasters (limited extensions, must petition IRS). Plan: identify potential replacements BEFORE the sale closes; if possible, get the replacement under contract before listing the relinquished property. The 45-day clock starts on the relinquished property's CLOSING date, not the contract date.
- Maybe, with a long delay. The IRS safe harbor (Rev. Proc. 2008-16): rent the replacement for at least 14 nights per year and limit personal use to 14 nights or 10% of rental days for AT LEAST the first 2 years post-exchange. After that, you can convert to primary residence. There's also a §121 + §1031 combo where you eventually exclude part of the gain as primary residence, but the calculation gets complex. Consult a 1031-specialized CPA before planning this path.
- Reverse 1031: buy the replacement BEFORE selling the relinquished property. Same 45/180 timelines apply but reversed. More expensive (additional Exchange Accommodation Titleholder fees ~USD 5K) and complex. Useful when you find the perfect replacement but haven't sold yours yet. Most reverse 1031s use a "parking" structure where the EAT holds title temporarily.
- A fractional 1031 vehicle — you buy units of a DST that owns a single piece of investment real estate (typically a large commercial property). Lets you 1031 into "passive" institutional-grade real estate without active management. Common for retiring investors wanting to defer tax AND exit active landlording. DST fees typically 5-7% of investment upfront + ongoing management fees. Limited liquidity (typically 5-10 year hold).
- Most states follow federal 1031 treatment — gain deferred at state level too. EXCEPTION: California "claw-back" rule — if you 1031 out of California to another state, CA taxes the gain when you eventually sell the replacement property (or sells of subsequent 1031 chain replacements). Massachusetts, Pennsylvania, and a few others have limitations on intra-state vs interstate exchanges. Multi-state investors should consult a tax CPA familiar with each relevant state's 1031 rules.
- Net Investment Income Tax (3.8% surtax) applies when modified adjusted gross income exceeds USD 200K (single) / USD 250K (married joint). Applies to the LESSER of: (a) net investment income or (b) MAGI above threshold. A 1031 exchange that produces no boot generates no current taxable income — so no NIIT triggered. Boot does count. Plan boot exposure carefully if you're close to the NIIT threshold.
- Yes — any US real estate held for investment is like-kind to any other. Single-family rental → office building, raw land → multifamily, retail → industrial all qualify. The like-kind definition for real estate is liberal post-2018 TCJA (which actually limited 1031 to real estate only, eliminating personal-property 1031s). The replacement property's CATEGORY doesn't matter; only that it's US investment real estate.
- Yes — non-resident aliens and foreign corporations can use 1031 for US-to-US real estate exchanges. FIRPTA withholding (15%) at the relinquished sale closing is typically held by the QI and applied to the replacement. Note: you CANNOT 1031 between US and foreign real estate — they're not like-kind. Foreign-investor 1031s are mechanically the same but require US-CPA + QI coordination on the FIRPTA withholding flow.
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