1031 Exchange Calculator

How a 1031 exchange works

• Like-kind exchange: under IRC §1031, you can defer capital gains tax when you sell investment real estate and reinvest the proceeds into another investment property within strict deadlines — 45 days to identify a replacement, 180 days to close.
• Adjusted basis: your original purchase price plus capital improvements, minus accumulated depreciation. Depreciation taken reduces your basis and is subject to §1250 recapture at 25% when you eventually sell.
• Realized gain: sale price minus selling costs minus adjusted basis. The exchange defers this gain; it does not eliminate it — it is embedded in your new property's basis.
• Boot: any value you receive that is not like-kind property. Cash boot (proceeds not reinvested) and mortgage boot (debt relieved but not replaced) are both taxable in the year of the exchange. Boot is taxed first as depreciation recapture (25%), then as long-term capital gain at your rate.
• To fully defer: (1) buy a replacement property worth at least as much as you sold, (2) replace at least as much debt (or compensate with extra cash), and (3) reinvest all net proceeds through a qualified intermediary (QI). You cannot touch the cash.

Worked example

You sell a rental for $500,000 (original basis $200,000, depreciation $50,000, selling costs $25,000, existing loan $150,000). Adjusted basis = $150,000. Amount realized = $475,000. Realized gain = $325,000. Net equity into the QI = $325,000.

You buy a $600,000 replacement with a $250,000 loan, putting $350,000 in — $25,000 more than the $325,000 from the exchange. No boot. Entire $325,000 gain is deferred. New basis = $600,000 − $325,000 = $275,000. Estimated tax deferred ≈ $53,750 ($50k × 25% recapture + $275k × 15% LTCG).

If instead you buy a $450,000 replacement with a $100,000 loan, the $50,000 debt reduction is partly offset by the $25,000 extra cash you invest — leaving $25,000 of mortgage boot. That boot is all depreciation recapture, taxed at 25% = $6,250 owed now. $300,000 of gain defers.

Frequently asked questions

Does the exchange eliminate the capital gains tax?

No — it defers it. The deferred gain is embedded in the replacement property's lower basis, so you owe the tax when you eventually sell without doing another exchange. Many investors "swap until they drop" and step up the basis at death under current law, though tax law can change.

What is a qualified intermediary (QI)?

A third party who holds the sale proceeds between the sale of the relinquished property and the purchase of the replacement. You cannot receive or control the proceeds during the exchange, or you lose the tax deferral. QI fees are typically $500–$1,500.

What counts as "like-kind" property?

Any real property held for investment or business use qualifies, regardless of type — a single-family rental can exchange into an apartment building, a commercial building, or land. Your primary residence does not qualify.

What is the 45/180-day rule?

You must identify potential replacement properties in writing within 45 calendar days of closing on the relinquished property, and close on a replacement within 180 calendar days (or the due date of your tax return, whichever is earlier). These deadlines are strict — there are almost no extensions.

Formulas last reviewed October 3, 2026. Results are estimates for educational use; not financial advice. Methodology →