1031 Exchange Calculator

An investor sells a rental for $600,000 on March 10, 2026. Selling costs are $36,000, the adjusted basis is $250,000 after $100,000 of depreciation, and $200,000 of mortgage is paid off, leaving $364,000.00 with the intermediary. The realized gain is $314,000.00. How much of it is deferred depends on the replacement:

Buying up with as much debt as before defers everything. The $650,000 purchase leaves $14,000.00 of cash boot, taxed now at $3,080.00, and defers $300,000.00. Buying down to $500,000 with a $100,000 loan needs $36,000.00 of the investor's own cash, and still leaves $64,000.00 of mortgage boot, because the debt fell. A plain sale would have cost $63,216.00 in federal tax.

This estimate taxes recognized gain as depreciation first: up to the $100,000 of depreciation taken, it is taxed at ordinary rates capped at 25%, and the rest at capital gains rates, with the 3.8% net investment income tax where it applies. That ordering is our reading of how the rules combine; a tax professional can confirm it for your exchange.

The clocks start on the day the sale of your property closes. You must identify replacement property by midnight on the 45th day after it, and receive the replacement by midnight on the earlier of the 180th day and the due date, including extensions, of your tax return for the year of the sale. Property identified late or received late isn't treated as like-kind, so the exchange fails and the gain is taxed.

The second rule catches late-year sales. A sale closing November 20, 2026 has an identification deadline of January 4, 2027. Its 180th day is May 19, 2027, but the 2026 return is due April 15, 2027, so that is the deadline unless the return is extended; with an extension, the deadline is the full May 19, 2027.

You can identify up to three properties whatever their value, or any number whose total value doesn't exceed 200% of the property you sold. Identify more than that and it counts as if you identified none, unless you acquire at least 95% of the value of everything you identified.

The deferred gain stays with you through the new property's basis: in the example, the $650,000 replacement has a basis of only $350,000.00. You depreciate from that carried-over basis, and when you eventually sell without exchanging, the deferred gain and the depreciation you take on the replacement come due. A loss can't be deducted in an exchange either; it carries into the new basis.

A qualified intermediary is a person who isn't you or someone disqualified (such as your agent), signs a written exchange agreement with you, and acquires and transfers both properties under it. To see the tax a plain sale would cost instead, with state tax and the net investment income tax, use the rental property capital gains tax calculator; the rental property depreciation calculator works out the depreciation behind your adjusted basis.

A 1031 exchange defers tax on the gain from selling an investment property when you reinvest in like-kind real estate, but any boot is taxed now. In the example, a $650,000 replacement defers $300,000.00 of a $314,000.00 gain and leaves $14,000.00 taxable.

Line up a qualified intermediary before the sale closes, run your numbers through the 1031 exchange calculator, and buy at least as much property, with at least as much debt or added cash, if you want to defer it all.