1031 Exchange Calculator
Calculate potential tax savings and analyze if your property qualifies for a 1031 exchange.
1031 Exchange Overview
A 1031 exchange allows you to defer capital gains taxes by reinvesting proceeds from a sold property into a new "like-kind" property. This calculator helps you understand potential tax savings and whether your exchange qualifies.
Property Being Sold
Total depreciation claimed during ownership
Commissions, closing costs, etc.
Replacement Property
Tax Rates (%)
Tax Analysis
Traditional Sale
1031 Exchange
Tax Savings
Qualification Status
✓ Qualifies for Full Tax Deferral
Key Requirements
- • Identify replacement property within 45 days
- • Close on new property within 180 days
- • Must use qualified intermediary
- • Properties must be held for investment/business
Understanding 1031 Exchanges
Tax Deferral
A 1031 exchange allows you to defer capital gains taxes indefinitely by continuously exchanging properties. This preserves your capital for larger investments.
Strict Timeline
You must identify potential replacement properties within 45 days and close within 180 days of selling your original property. Missing these deadlines disqualifies the exchange.
Equal or Up
To defer all taxes, your replacement property must be equal to or greater in value, with equal or greater debt. Any cash received ("boot") is taxable.
What a 1031 Exchange Actually Saves You
Under Section 1031 of the Internal Revenue Code, an investor who sells a rental or business property and reinvests the proceeds into another like-kind investment property can defer the taxes that a normal sale would trigger. Those taxes come in three layers: federal capital gains tax (typically 15 or 20 percent), depreciation recapture (up to 25 percent on every dollar of depreciation you claimed), and state income tax where applicable. This calculator adds up all three so you can see, side by side, what a traditional sale would cost versus what a fully qualifying exchange lets you keep working for you.
The qualification checks in the results mirror the practical rules for full deferral: the replacement property should be of equal or greater value, carry equal or greater debt, and absorb all of your equity. Fall short on any of those and the shortfall, called boot, becomes taxable in the year of the exchange even if the rest of the transaction qualifies.
A Worked Example
Take a rental purchased years ago for $300,000 that now sells for $500,000, with $60,000 of depreciation claimed, $30,000 in selling costs, and a $200,000 mortgage balance. The adjusted basis is $240,000, so the total gain is $230,000. In a traditional sale at a 20% capital gains rate, 25% recapture rate, and 5% state rate, the bill is roughly $34,000 in capital gains tax, $15,000 in depreciation recapture, and $11,500 in state tax, about $60,500 in total, leaving around $209,500 of the $270,000 net proceeds after tax.
Exchange instead into a $550,000 replacement with a $250,000 loan and every test passes: greater value, greater debt, and all $270,000 of equity redeployed. The entire $60,500 is deferred, which is roughly 29 percent more capital working in the new property than the after-tax sale would have left you. Investors who keep exchanging until death can pass properties to heirs at a stepped-up basis, potentially eliminating the deferred tax entirely, a strategy often called "swap till you drop."
The Deadlines Are Unforgiving
The two dates that sink most failed exchanges are the 45-day identification window and the 180-day closing window, both counted from the closing of your sale. In practice that means lining up candidate replacement properties and a qualified intermediary before you list, not after you close. This page is general information, not tax or legal advice; exchange rules have technical traps (related-party rules, partnership interests, personal-use limits), so run any real transaction past a CPA or exchange professional first.
Frequently Asked Questions
What are the 45-day and 180-day deadlines in a 1031 exchange?
From the day you close on the sale of your relinquished property, you have 45 calendar days to identify potential replacement properties in writing to your qualified intermediary, and 180 calendar days to close on one of them. Both clocks run at the same time, weekends and holidays included, and the IRS does not grant extensions except in federally declared disasters. Missing either deadline disqualifies the exchange.
What is "boot" and why does it get taxed?
Boot is any value you receive in the exchange that is not like-kind real estate, most commonly cash you keep from the sale or a reduction in mortgage debt that is not replaced. Boot is taxable in the year of the exchange up to the amount of your gain, which is why buying equal-or-greater in both price and debt matters for full deferral.
Why does depreciation recapture make a 1031 exchange more valuable?
Every dollar of depreciation you claimed while owning the rental reduces your cost basis and is recaptured at a rate of up to 25 percent when you sell, on top of capital gains tax. On a property with $60,000 of accumulated depreciation, that is up to $15,000 of recapture tax alone. A qualifying 1031 exchange defers both the capital gains tax and the depreciation recapture.
Do I need a qualified intermediary, or can I hold the sale proceeds myself?
You must use a qualified intermediary. If you take actual or constructive receipt of the sale proceeds, even briefly, the IRS treats the transaction as a taxable sale. The intermediary holds the funds between closings and must be engaged before you close on the property you are selling. This calculator is for planning only, so work with an intermediary and a tax advisor before committing to an exchange.