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1031 Exchange Calculator

Calculate your potential tax savings with a 1031 exchange, estimate boot amounts, and track important deadlines. Make informed decisions about your real estate investments.

How a 1031 Exchange Works

A 1031 exchange, also known as a like-kind exchange, allows real estate investors to defer capital gains taxes when selling an investment property by reinvesting the proceeds into another qualifying property. Named after Section 1031 of the Internal Revenue Code, this strategy has been used by savvy investors for decades to grow their portfolios tax-efficiently.

🔄 The 1031 Exchange Process

1. Sell your investment property (relinquished property)

2. Work with a Qualified Intermediary who holds the proceeds

3. Identify replacement properties within 45 days

4. Close on replacement property within 180 days

5. Defer all capital gains taxes if done correctly

To fully defer taxes, you must purchase a property of equal or greater value and reinvest all the equity. Any cash or debt reduction received is considered "boot" and is taxable.

💸 Capital Gains Tax Rates (2024-2025)

Tax TypeRateApplies To
Federal Capital Gains0% / 15% / 20%Based on income level
Depreciation Recapture25%Previously claimed depreciation
Net Investment Income Tax3.8%Income > $200K (single) / $250K (married)
State Capital Gains0% - 13.3%Varies by state

* Combined tax rates can exceed 40% in high-tax states like California and New York.

✅ 1031 Exchange Requirements

🏢Both properties must be held for investment or business use (not personal residence)
🏠Properties must be "like-kind" - any real estate for any real estate in the US
⏰Identify replacement property within 45 days of sale
📅Complete the exchange within 180 days of sale
🤝Must use a Qualified Intermediary - you cannot touch the funds
💰Reinvest all proceeds and maintain equal or greater debt to defer 100%

💡 Quick Tips

  • Exchange "up" - buy more expensive property to defer all taxes
  • Keep debt equal or higher on replacement property
  • Never touch the sale proceeds directly
  • You can do multiple exchanges to defer indefinitely
  • Consider a "swap till you drop" strategy for estate planning

⚠️ Common Mistakes

  • Missing the 45-day ID deadline
  • Taking cash out (creates boot)
  • Buying cheaper replacement property
  • Reducing mortgage debt
  • Not using a Qualified Intermediary

🏆 States with 0% Capital Gains Tax

AlaskaFloridaNevadaSouth DakotaTennesseeTexasWyoming

Frequently Asked Questions

A 1031 exchange, named after Section 1031 of the IRS Code, allows real estate investors to defer capital gains taxes when selling an investment property by reinvesting the proceeds into a similar 'like-kind' property. This powerful tax strategy lets you preserve your investment capital and potentially grow your real estate portfolio without immediate tax consequences.

The 90% rule states that if you identify more than three replacement properties, the total fair market value of all identified properties cannot exceed 200% of the value of the relinquished property, OR you must acquire at least 95% of the value of all properties identified. This rule prevents investors from identifying an unlimited number of properties as potential replacements.

The 75% rule is actually part of the 95% identification rule. If you identify more than three properties and their total value exceeds 200% of the relinquished property, you must acquire properties representing at least 95% of the total identified value. Some refer to this in context of the improvement exchange where 75% of exchange funds must be used for property acquisition vs improvements.

The capital gains tax on $100,000 depends on your income level and filing status. For most investors, the federal rate is 15% ($15,000), plus state taxes which vary from 0% to 13.3%. High earners may pay 20% federal plus 3.8% Net Investment Income Tax. A 1031 exchange can defer these taxes entirely if you reinvest in qualifying replacement property.

Boot is any cash or non-like-kind property received during a 1031 exchange that doesn't qualify for tax deferral. There are two main types: Cash Boot (leftover cash not reinvested) and Mortgage Boot (debt reduction when your new property has a smaller mortgage). Boot is taxable up to the amount of your realized gain.

Alternatives include: living in the property for 2+ years to qualify for the primary residence exclusion ($250K single/$500K married), holding until death for stepped-up basis, donating to charity, using installment sales to spread gains over time, or investing in Opportunity Zones. Each strategy has specific requirements and limitations.

⚠️ Disclaimer: This calculator provides estimates for educational purposes only and should not be considered tax advice. Tax laws are complex and vary by situation. Always consult with a qualified tax professional and Qualified Intermediary before executing a 1031 exchange.