1031 Exchange Calculator

What Is a 1031 Exchange?

A Section 1031 exchange lets you sell investment or business real estate and reinvest the proceeds into another like-kind property while deferring federal capital gains tax and depreciation recapture. The Tax Cuts and Jobs Act limited 1031 treatment to real estate only — personal property like equipment or vehicles no longer qualifies. To defer 100% of gain, the replacement property must equal or exceed the net sale price and all proceeds must be reinvested.

How Deferred Gain Is Calculated

Realized gain equals net sale price minus adjusted basis (original cost plus improvements minus accumulated depreciation). In a fully qualified 1031 exchange, 100% of this gain — including the portion attributable to depreciation recapture taxed at 25% — is deferred into the replacement property through a reduced basis. You do not eliminate the tax; you delay it until you sell the replacement property outside of a 1031.

What Is Boot and Why Does It Matter?

Boot is any non-like-kind value you receive in the exchange — cash taken out at closing, debt relief (your old mortgage was larger than your new mortgage), or personal property. Boot is immediately taxable up to the amount of realized gain. Common boot traps: buying a cheaper replacement, taking cash to pay closing costs, or failing to replace debt with equal financing. Plan replacement financing carefully to avoid unintended boot.

1031 Deadlines and Rules

Two strict timelines apply: 45 days from the sale of the relinquished property to identify replacement property in writing, and 180 days to close on that replacement. A qualified intermediary must hold the sale proceeds — you cannot touch the cash. Properties must both be held for investment or business use. Failing any rule converts the transaction into a taxable sale retroactively.