1031 Exchange Calculator
Calculate tax deferral benefits for your property exchange
1031 Exchange Rules
45-Day Identification Period: You must identify potential replacement properties within 45 days of selling your relinquished property.
180-Day Purchase Period: You must complete the purchase of replacement property within 180 days of sale.
Equal or Greater Value: To defer all taxes, the replacement property must be of equal or greater value and all equity must be reinvested.
What is a 1031 Exchange?
A Section 1031 Exchange (named after the IRS tax code) allows real estate investors to:
Sell an investment property
Reinvest proceeds into a "like-kind" property
Defer 100% of capital gains taxes (Federal + most state taxes)
Key Rules & Requirements
45-Day Identification Period: Must identify replacement property within 45 days of sale
180-Day Closing: Must complete purchase within 180 days of sale
Equal or Greater Value: Replacement property must be of equal or higher value
Reinvestment of All Proceeds: All sale proceeds must go into new property
Like-Kind Property: Both properties must be investment/business real estate
1031 Exchange Calculator
This tool helps estimate:
Tax deferral amount
Required reinvestment
Potential cash flow differences
Inputs Needed:
Sale Price of Relinquished Property
Original Purchase Price
Accumulated Depreciation
Mortgage Balance (if any)
Estimated Replacement Property Price
Example Calculation:
| Parameter | Amount |
|---|---|
| Sale Price | $500,000 |
| Original Purchase Price | $300,000 |
| Accumulated Depreciation | $50,000 |
| Mortgage Balance | $200,000 |
| Replacement Property Price | $600,000 |
Calculations:
Capital Gain: $500,000 - $300,000 = $200,000
Depreciation Recapture: $50,000
Total Taxable Gain Without 1031: $250,000
Estimated Taxes Deferred (20% capital gains + 25% depreciation recapture): ~$62,500
Required Reinvestment: $500,000 (all proceeds must be reinvested)
Benefits of a 1031 Exchange
✔ Tax Deferral: Potentially save tens/hundreds of thousands in taxes
✔ Wealth Building: More capital remains invested
✔ Portfolio Upgrade: Move into better properties
✔ Estate Planning: Possible step-up in basis at death
Common Mistakes to Avoid
❌ Missing strict 45/180 day deadlines
❌ Taking "boot" (cash or non-like-kind property)
❌ Using personal residence (not allowed)
❌ Poor replacement property identification