1031 Exchange Boot Calculator
Calculate the taxable boot in a §1031 like-kind exchange. Boot = anything received that is not like-kind property. Includes cash boot (cash received) and mortgage boot (debt relief net of new debt assumed). Boot triggers recognition of gain up to the boot amount — your shield against fully deferring is the smaller of realized gain or boot.
Section 1031 in Plain English (Post-TCJA / OBBB)
Since the 2017 Tax Cuts and Jobs Act, §1031 is limited to real property held for investment or business use. Personal-property like-kind exchanges ended Dec 31, 2017. OBBB 2025 preserved §1031 for real property. Exchange must complete within 180 days; replacement properties identified within 45 days. All proceeds must pass through a Qualified Intermediary (QI) — receipt by exchanger of any cash is taxable boot.
Two Types of Boot
Cash boot — actual cash, cash equivalents, or non-like-kind property received. Common cases: relinquished property sells for more than replacement cost; QI returns unused funds; you receive a 'sweetener' from buyer. Mortgage boot — net reduction in debt obligation. Calculated as (debt on relinquished property − debt on replacement property). If you swap a $400K-mortgaged property for a $300K-mortgaged property, you have $100K of mortgage boot. Mortgage boot can be offset by cash you pay in.
Calculating Recognized Gain
Recognized gain (taxable) = lesser of (a) realized gain or (b) total boot. The boot doesn't *create* gain — it *limits* deferral. Example: relinquished property had $200K realized gain, but you received $50K cash boot + $30K mortgage boot. Recognized gain = $80K (the boot). The other $120K is deferred via the replacement property's reduced basis.
Strategies to Eliminate Boot
(1) Trade up — buy replacement property of equal or greater value AND equal or greater debt. (2) Add cash to replace lost debt (cash paid offsets mortgage boot). (3) Use a Delaware Statutory Trust (DST) for the boot portion — preserves like-kind status. (4) Build improvements on replacement property (construction exchange under Rev. Proc. 2000-37). (5) Reverse exchange — buy replacement first, then sell relinquished (also Rev. Proc. 2000-37 safe harbor). Each strategy has §1031 timing strictness.
Sources: IRC §1031, Treas. Reg. §1.1031, Rev. Proc. 2000-37 (reverse exchange safe harbor), IRS Form 8824. Last updated: May 2026. Not tax advice.