1031 Exchange Calculator
See capital gains tax deferred with a 1031 exchange, boot exposure, and the minimum replacement property value and debt to defer the full gain.
100% client-side. US federal estimates using 2025 IRS brackets (retrieved 2026-05-18). Inputs stay in your browser (ons-1031-exchange-inputs).
This is a simplified estimate. 1031 rules are complex. Always work with a Qualified Intermediary and tax advisor.
Tax deferred
$49,120
Tax without 1031
$49,120
Full deferral: no boot detected on this scenario
Gain on sale
$240,000
Tax deferred
$49,120
Boot amount
$0
Net proceeds (with 1031)
$250,000
Without 1031: $200,880
Avoid all boot
To defer tax on the full gain, buy at least $400,000 in replacement property and take on at least $150,000 in new debt.
Tax without 1031 exchange
- Depreciation recapture (25%)$10,000
- Long-term capital gains (15%)$30,000
- NIIT (3.8%)$9,120
- Total tax$49,120
Adjusted basis $160,000. LTCG rate applied: 15% (NIIT applies).
1031 boot analysis
- Equity boot$0
- Mortgage boot$0
- Taxable boot gain$0
- Tax on boot$0
Relinquished property
Tax profile
Replacement property
How does the 1031 Exchange Calculator work step by step?
This calculator models a 1031 exchange, which allows you to defer capital gains tax when selling an investment property by reinvesting the proceeds into another like-kind property. You enter the sale price of your relinquished property, your adjusted basis (original purchase price plus improvements minus depreciation), the purchase price of the replacement property, and your tax rate. The tool calculates the capital gain, tax owed if you sell outright, and tax deferred if you complete the 1031 exchange. It also shows how much equity you preserve by deferring the tax, which compounds over time if you continue to exchange properties.
When should you use the 1031 Exchange Calculator?
Use this calculator when considering selling an investment property and want to compare the tax impact of a direct sale versus a 1031 exchange. It is especially valuable when your property has appreciated significantly and a direct sale would trigger a large tax bill that reduces your purchasing power for the next property. The tool helps you see how much more property you can buy using the deferred tax dollars as additional equity. It is also useful for modeling multi-generation wealth transfers, where heirs receive a step-up in basis at death and erase deferred gains entirely.
How do you read the 1031 Exchange Calculator results?
The calculator shows tax owed on a direct sale and tax deferred via 1031 exchange. The deferred amount becomes additional equity you can deploy into the replacement property. For example, if you owe $100,000 in tax on a sale, a 1031 exchange lets you invest that $100,000 into the next property instead of sending it to the IRS. Over multiple exchanges, this compounding effect builds significant wealth. The tool also shows that if you hold until death, your heirs get a step-up in basis and the deferred tax disappears entirely, making 1031 exchanges a powerful estate planning tool.
What does a typical 1031 Exchange Calculator result look like?
You bought a property for $200,000, added $50,000 in improvements, and took $30,000 in depreciation. Your adjusted basis is $220,000 ($200,000 + $50,000 - $30,000). You sell for $500,000. Capital gain: $280,000. If your combined federal and state capital gains rate is 25%, you owe $70,000 in tax. After tax, you have $430,000 to reinvest. If you complete a 1031 exchange, you defer the $70,000 tax and have the full $500,000 to reinvest. You can buy a $625,000 property with 20% down ($125,000) and a $500,000 loan, versus a $537,500 property if you paid the tax ($430,000 down at 20% down = $2,150,000 purchase price). That is an $87,500 difference in purchasing power.
Frequently asked questions
What properties qualify for a 1031 exchange?
Any U.S. real estate held for investment or business use qualifies, including rental properties, commercial buildings, raw land, and even parking lots. Primary residences, vacation homes used primarily for personal use, and property held for resale (fix-and-flip inventory) do not qualify. The IRS requires both the relinquished property (what you sell) and the replacement property (what you buy) to be held for investment or business use. You can exchange a single-family rental for a strip mall or vacant land; all real estate is like-kind under current law.
What are the 1031 exchange timelines I must follow?
You have 45 days from the sale of your relinquished property to identify up to three potential replacement properties in writing to your qualified intermediary. You must close on at least one of those properties within 180 days of the sale. These deadlines are strict; weekends and holidays count, and there are no extensions. If you miss the 45-day identification deadline, the exchange fails and the IRS taxes the gain immediately. Most investors identify properties early and close as soon as possible to reduce execution risk.
Do I have to reinvest all the sale proceeds to defer all the tax?
Yes, to defer 100% of the capital gains tax, you must reinvest all net proceeds (sale price minus selling costs and debt payoff) into the replacement property and take on equal or greater debt. If you receive any cash at closing (called boot), that cash is taxable. For example, if you sell for $500,000 and buy for $450,000, the $50,000 difference is taxable. To defer all tax, the replacement property must cost at least as much as the net sale proceeds, and your new loan must be at least as large as the loan you paid off.
What is a qualified intermediary and why do I need one?
A qualified intermediary (QI) is a third-party entity that holds your sale proceeds and facilitates the exchange. You cannot touch the proceeds yourself; if you receive the cash directly, the exchange is disqualified and the gain is taxable. The QI holds the funds in escrow, receives identification notices, and disburses the funds to purchase the replacement property. Most title companies and attorneys offer QI services for a fee of $800-$1,500. You must engage the QI before closing on the sale of your relinquished property.
Can I use a 1031 exchange to buy multiple replacement properties?
Yes, you can identify up to three replacement properties of any value, or more than three if they meet the 200% rule (total value does not exceed 200% of the relinquished property value) or the 95% rule (you close on properties worth at least 95% of everything you identified). Most investors stick to three or fewer properties to simplify execution. You can also exchange one property for multiple, or multiple properties for one, as long as the combined value and debt meet the exchange requirements.
What happens if I hold a 1031 property until I die?
Your heirs receive a step-up in basis to the fair market value at the date of your death, which erases all deferred capital gains. If you bought for $200,000, exchanged into properties now worth $1 million, and die, your heirs inherit with a $1 million basis and owe zero tax on the $800,000 gain. This makes 1031 exchanges a powerful estate planning tool: you defer tax for life, and your heirs never pay it. The step-up applies to all appreciated assets, but 1031 exchanges allow you to compound the benefit over multiple properties.
Can I convert a 1031 property into a primary residence later?
Yes, but you must hold it as a rental for at least 1-2 years (IRS safe harbor is 2 years or 24 months of rental use in a 5-year period). After that, you can move in and treat it as your primary residence. If you live in it for 2 of the next 5 years, you can sell and exclude up to $250,000 (single) or $500,000 (married) of gain under the primary residence exclusion. This strategy allows you to defer tax via 1031, then erase it via the primary residence exclusion, but the timing and documentation requirements are strict.
What is boot and how is it taxed in a 1031 exchange?
Boot is any value you receive in a 1031 exchange that is not like-kind property, including cash, debt relief, or non-real-estate assets. Boot is taxable in the year of the exchange. For example, if you sell for $500,000 with a $300,000 loan and buy for $450,000 with a $250,000 loan, you received $50,000 in debt relief (boot). That $50,000 is taxable even though you completed the exchange. To avoid boot, your replacement property must cost at least as much as your sale price, and your new loan must be at least as large as your old loan.
Can I do a reverse 1031 exchange where I buy first and sell later?
Yes, a reverse exchange allows you to buy the replacement property before selling the relinquished property. This is useful in competitive markets where you find the perfect replacement before selling your existing property. The reverse exchange is more complex and expensive: the qualified intermediary must take title to the replacement property and hold it until you sell the relinquished property, which adds legal and holding costs. The same 45/180-day timelines apply, but in reverse. Most investors avoid reverse exchanges unless market conditions require it.
How does depreciation recapture work in a 1031 exchange?
Depreciation recapture tax is also deferred in a 1031 exchange, not eliminated. When you sell a rental property, the IRS recaptures depreciation you claimed and taxes it at ordinary income rates (up to 25%). A 1031 exchange defers this tax along with the capital gain. However, if you eventually sell the replacement property in a taxable sale, you owe recapture on all the depreciation you claimed on both the original and replacement properties. The OnSumo rental ROI calculator can help you estimate depreciation recapture when modeling future sales.