1031 Exchange Calculator
Calculate your potential tax savings with a 1031 like-kind exchange. See capital gains, depreciation recapture, and total taxes deferred.
Understanding 1031 Exchanges
A 1031 Exchange, named after Section 1031 of the Internal Revenue Code, is one of the most powerful tax deferral strategies available to real estate investors. When executed properly, it allows you to defer 100% of your capital gains taxes indefinitely.
How a 1031 Exchange Works
- Sell your property - List and sell your investment property
- Engage a Qualified Intermediary - A QI holds the proceeds (you cannot touch the money)
- Identify replacement property - Within 45 days, identify up to 3 properties (or more under certain rules)
- Close on replacement - Complete the purchase within 180 days
- Defer taxes - Your tax basis carries over to the new property
Understanding Boot
"Boot" is any non-like-kind property received in the exchange and is taxable. Common types include:
- Cash Boot: Cash received from the exchange (if replacement costs less than sale proceeds)
- Mortgage Boot: Reduction in debt (if new mortgage is less than old mortgage)
To avoid boot, ensure your replacement property is of equal or greater value and your new debt is equal or greater.
Types of 1031 Exchanges
- Delayed Exchange: Most common type with 45/180 day timeline
- Simultaneous Exchange: Properties close on the same day
- Reverse Exchange: Buy replacement before selling relinquished property
- Improvement Exchange: Use proceeds to improve the replacement property
Important Considerations
- Taxes are deferred, not eliminated—eventually, if you sell without another 1031, taxes become due
- Upon death, heirs receive a stepped-up basis, potentially eliminating deferred taxes
- You must hold properties for investment purposes, not personal use
- Vacation homes may qualify with specific usage requirements
- Consult with tax professionals for your specific situation