Section 1031 Boot Tax Calculator

Section 1031 like-kind exchanges defer capital gains and depreciation recapture tax when you sell a business or investment property and buy a replacement. But if you receive cash, are relieved of debt, or take property that isn't fully like-kind, you've received 'boot' — and the boot is taxable now.

Three Types of Boot

Cash boot: cash received during the exchange. Mortgage boot: when your new property has less debt than the relinquished property (the debt relief is treated as economic gain). Personal-property boot: non-real-estate items mixed into a real estate exchange (since 2018 TCJA, only real estate qualifies for 1031).

How Boot Is Taxed

Boot is taxable up to the total realized gain on the relinquished property. The recognized portion is first applied to Section 1250 depreciation recapture (taxed at 25% federal), then to Section 1231 capital gains (taxed at 15% or 20% long-term). State tax adds 5–13% in high-tax states.

How to Avoid Boot

(1) Replacement property price ≥ relinquished property price. (2) New mortgage ≥ old mortgage relieved. (3) Reinvest 100% of net cash proceeds — do not pull money out of the exchange. (4) Use a qualified intermediary (QI) — you cannot take constructive receipt of any proceeds. (5) Identify replacement within 45 days and close within 180 days.

45-Day and 180-Day Deadlines — Non-Negotiable

The 45-day identification and 180-day closing rules per IRS Form 8824 are calendar-day hard deadlines with no weekend or holiday extensions and virtually no relief in practice. Miss either and the entire exchange fails — the full realized gain becomes taxable, not just the boot. The 45-day clock starts the day you close on the relinquished property. You must identify (in writing to the QI) up to three replacement properties (Three-Property Rule), or more if their aggregate fair market value stays within 200% of the relinquished property (200% Rule). The 180-day closing deadline runs concurrently, not sequentially — day 180 measured from the same relinquished-property closing date, not from the 45-day mark. If your tax return due date arrives before day 180, you must file an extension or the exchange collapses. Reverse exchanges (buy first, sell later) start the clock at the parking-day, per Rev. Proc. 2000-37.

1031 Exchange Boot Tax Calculator: Real Numbers Example

Sell a $1,000,000 relinquished property with $300,000 outstanding mortgage and $250,000 depreciation taken (adjusted basis $550,000). Buy a $900,000 replacement with $250,000 new mortgage. Realized gain = $450,000. Cash boot = $100,000 (price gap); mortgage boot = $50,000 (debt relief). Recognized gain (taxable) = $150,000, allocated first to depreciation recapture at 25% federal ($37,500 tax) then remaining $100,000 as long-term capital gain at 20% ($20,000 tax) = $57,500 federal tax bill. State tax on the recognized gain adds 5-13% depending on jurisdiction. The deferred portion ($300,000) rolls into the replacement's basis. Plug your specific numbers into the calculator above to see your exact liability broken down by depreciation recapture, capital gains, and Net Investment Income Tax (3.8% NIIT if applicable).

Last updated 2026-07-03. Sources: IRS Like-Kind Exchanges, IRS Form 8824, Rev. Proc. 2000-37 (reverse exchanges).