Free 1031 Exchange Calculator: Defer Capital Gains Tax (2026 IRS Rules)
The most comprehensive IRC Section 1031 like-kind exchange calculator for US real estate investors. Instantly calculate your capital gains tax deferral and depreciation recapture. Model cash and mortgage boot exposure, track strict 45-Day and 180-Day IRS deadlines, estimate Qualified Intermediary (QI) fees, and project long-term wealth using IRC §1014 step-up in basis planning.
Fill in your property details and click “Calculate 1031 Exchange” to see your full tax deferral analysis.
How the IRC Section 1031 Tax Deferral Calculator Works
6 ModulesEnter your property details across 4 input tabs and the calculator computes your full capital gains tax exposure, depreciation recapture, state tax, and NII — then shows every dollar deferred via the 1031 exchange.
- Federal cap gains (0%, 15%, or 20%) based on income
- 25% depreciation recapture (Section 1250)
- All 50 states + D.C. state capital gains rates
- 3.8% Net Investment Income Tax (NII/NIIT) toggle
Calculates exactly how much taxable “boot” you receive if the replacement property is less valuable than the relinquished property — and precisely how much tax you owe on that boot.
- Cash boot = net sale proceeds − replacement price
- Mortgage boot = old mortgage balance − new mortgage
- Eliminate boot: shows exact replacement price needed
- IRS Form 8824 Line 18 reference mapping
Enter your relinquished property closing date and the calculator automatically computes your two critical IRS deadlines with a visual progress bar showing how many days remain.
- Day 45 — last day to identify replacement property in writing
- Day 180 — hard close deadline on replacement property
- Live progress bar — days elapsed vs. days remaining
- Reverse & Improvement exchange type deadline notes
Projects the portfolio value difference between doing a 1031 exchange vs. selling outright and paying taxes, over a user-selected horizon of 5–40 years at a configurable annual return rate.
- With exchange vs. Without exchange compounding curves
- Real inflation-adjusted value (3rd line, dashed)
- Exchange advantage = the compounded value of deferred tax
- Year-by-year milestone table with CSV-style layout
Estimates the total Qualified Intermediary fee based on QI type (Institutional, Non-Institutional, or Custom), number of additional replacement properties, and exchange type (Delayed, Reverse, Improvement).
- Institutional QI: ~$800–$1,200 base fee
- Reverse exchange: minimum $3,000 (EAT required)
- Improvement/Build-to-suit: minimum $2,500
- Net ROI of exchange: taxes deferred ÷ QI cost
Projects the replacement property’s value at the end of the projection period and calculates how much deferred gain — including depreciation recapture — would be permanently eliminated for heirs under IRC Section 1014 step-up basis rules.
- Property value at death = replacement price × (1 + r)^t
- Taxes eliminated for heirs (cap gains + recapture + state)
- Current IRC 1014 step-up basis rules (subject to law changes)
- Toggle on/off in Advanced tab
Step-by-Step Usage Guide
Choose Delayed (standard), Reverse, or Improvement exchange. Enter your sale price, original purchase price, capital improvements, selling costs, years owned, and existing mortgage balance. The depreciation field auto-calculates from Purchase Price ÷ 27.5 × Years Owned — override it if you have the exact IRS figure.
⚠️ Tip: Use your actual IRS depreciation schedule figure, not the auto-calculated estimate, for accuracy.Enter the intended replacement property price, new mortgage amount, and buying closing costs. Select your property identification rule: 3-Property (most common), 200%, or 95% rule. The calculator flags if your replacement price is below the net sale price — which would trigger taxable boot.
✅ Tip: Replacement price must equal or exceed net sale proceeds to achieve full tax deferral.Select filing status and enter your taxable income excluding the property sale — this determines whether your long-term capital gains rate is 0%, 15%, or 20%. Select your state for state capital gains tax. Toggle NII on if your MAGI exceeds $200K (single) or $250K (MFJ).
Select projection years (5–40), annual return rate, inflation rate, and break-even analysis period. These drive the Wealth Compounding chart and Sell vs. Exchange break-even comparison. Toggle Step-Up Basis analysis on to see the estate planning benefit.
The results panel populates with 6 KPI cards: Total Tax Deferred, Capital Gain, Tax Without Exchange, Reinvestment Capital, Compounded Benefit, and QI Exchange Cost. The full tax breakdown, boot analysis, wealth projection chart, and IRS Form 8824 reference worksheet all render below.
📄 Export: Download PDF report or share results via WhatsApp.Review the Deadline Tracker — Day 45 (ID deadline) and Day 180 (close deadline) are hard IRS deadlines with no extensions for weekends or holidays. Share your PDF report with your Qualified Intermediary and CPA before proceeding. This calculator is for educational planning — always confirm with your tax professional.
Like-Kind Exchange Guide: Navigating US Real Estate Tax Deferral
IRC § 1031Calculating Capital Gains, Depreciation Recapture & NIIT
When you sell investment real estate without a 1031 exchange, you owe taxes on the Realized Gain, which has two components calculated separately:
| Tax Component | Rate | Applies To |
|---|---|---|
| Federal Capital Gains | 0% / 15% / 20% | Gain above depreciation |
| Depreciation Recapture | 25% (flat) | All accumulated depreciation |
| State Capital Gains | 0%–13.3% | Total gain (most states) |
| Net Investment Income Tax | 3.8% | Cap gain if MAGI > threshold |
| Combined Max Rate | ~40–43% | CA/NY high-income investors |
The 5 IRS Qualifying Rules for Relinquished & Replacement Properties
All five conditions must be met for a valid tax-deferred exchange under IRS regulations:
| 1. Like-Kind Property | Both properties must be US real estate held for investment or business use. Type doesn’t matter — apartment → office → land → industrial all qualify |
| 2. Equal or Greater Value | Replacement property net price ≥ relinquished property net sale price to defer 100% of gain |
| 3. Equal or Greater Equity | New mortgage + cash invested ≥ old mortgage balance. Any reduction = mortgage boot = taxable |
| 4. 45-Day ID Rule | Must identify replacement properties in writing to QI within 45 calendar days of closing. No extensions — ever |
| 5. 180-Day Close Rule | Must take title to replacement property within 180 calendar days of relinquished property closing |
Calculating “Boot”: Cash vs. Mortgage Boot Traps
“Boot” is any non-like-kind property received in the exchange — it is fully taxable in the year of the exchange. There are two types that investors often overlook:
Cash Boot occurs when you receive cash back because the replacement property cost less than the net sale proceeds. Example: sell for $800,000 net, buy for $750,000 → $50,000 cash boot is taxable.
Mortgage Boot (also called “debt relief boot”) occurs when your new mortgage is smaller than the old one. Example: old mortgage $300,000, new mortgage $200,000 → $100,000 mortgage relief = $100,000 boot. This catches investors off-guard. You can offset mortgage boot by paying additional cash at closing on the replacement property.
Types of Like-Kind Exchanges: Delayed, Reverse & Build-to-Suit
| Exchange Type | Structure | Typical QI Cost |
|---|---|---|
| Delayed (Standard) | Sell first → QI holds funds → buy within 180 days. By far the most common type. | $800–$1,200 |
| Reverse Exchange | Buy replacement first via EAT → sell relinquished within 180 days. Used in hot markets. | $3,000–$5,000 |
| Improvement (Build-to-Suit) | EAT holds replacement title while improvements are built using exchange funds. Must complete within 180 days. | $2,500–$4,000 |
An Exchange Accommodation Titleholder (EAT) is a special-purpose entity used in reverse and improvement exchanges to hold property title temporarily — since you cannot hold title to both properties simultaneously during a valid 1031 exchange. EATs significantly increase QI fees and complexity.
The “Defer, Defer, Die” Strategy: IRC §1014 Step-Up in Basis
The most powerful application of 1031 exchanges is the multi-generational wealth strategy informally called “defer, defer, die.” An investor continually exchanges into larger properties — deferring capital gains taxes indefinitely — and holds until death. Under IRC Section 1014, heirs inherit the property with a stepped-up basis equal to the fair market value at the date of death. All accumulated deferred capital gains and depreciation recapture are permanently eliminated — never taxed.
Example: An investor buys a property for $200,000, exchanges into larger properties over 30 years, and the portfolio grows to $3,000,000 at death. The heirs inherit at the $3,000,000 stepped-up basis. If they immediately sell for $3,000,000, they owe $0 in capital gains taxes — despite $2,800,000 of gain that was never taxed.
Outright Sale vs. 1031 Exchange: 20-Year ROI Comparison
Illustrative example: $800,000 sale, $300,000 adjusted basis, California investor (MFJ, $150K income), 7% annual return:
| Scenario | Reinvest Capital | Portfolio @ Yr 20 | Advantage |
|---|---|---|---|
| Sell Outright (Pay Tax) | ≈ $395,000 | ≈ $1,528,000 | — |
| 1031 Exchange | ≈ $770,000 | ≈ $2,978,000 | +$1,450,000 |
The $375,000 in deferred taxes compounds for 20 years at 7% — turning into a $1,450,000 additional portfolio advantage. This is the core argument for every 1031 exchange: you’re not just deferring tax, you’re putting the IRS’s share of your capital to work for you.
5 Real US Investment Scenarios: Boot, State Taxes & Reverse Exchanges
Verified CalculationsAdvanced 1031 Strategies & IRS Compliance Tips for Investors
20 advanced strategies, deadline rules, and IRS compliance traps — sourced from IRC §1031, Treas. Reg. 1.1031(k)-1, IRS Form 8824 instructions, and US Tax Court precedent. Read before you exchange.
The IRS grants zero extensions to the 45-day identification deadline or the 180-day closing deadline under Treas. Reg. 1.1031(k)-1. These are calendar days — weekends, holidays, and acts of God do not pause the clock (except federally declared disasters under Rev. Proc. 2018-58, which may grant limited relief). If you miss Day 45, your entire exchange is invalidated and full taxes become due immediately. Most CPAs recommend completing your property identification by Day 40 to allow review time.
The 180-day deadline is actually the earlier of 180 calendar days after the relinquished property closes or the due date (including extensions) of your federal tax return for the year the exchange began. If you close a relinquished property in December and file by April 15 without an extension, your 180-day window is cut short. Always file for a tax extension (Form 4868) if your exchange closes late in the calendar year.
Under Treas. Reg. 1.1031(k)-1(c), replacement properties must be identified in a signed, written document delivered to your QI, the seller, or a disinterested third party by midnight on Day 45. Verbal agreements, emails without a signature, and letters of intent are not sufficient. The document must include the property’s legal address or legal description. Use your QI’s official identification form — most provide one electronically.
The exchange agreement with your Qualified Intermediary must be signed before the relinquished property closes. If you receive any sale proceeds — even briefly — the exchange is disqualified under the “constructive receipt” doctrine (IRC §1031(a)(3)). Your QI must be on the HUD-1/ALTA settlement statement as the direct recipient of exchange funds. Waiting until after closing to hire a QI is the single most common way exchanges fail.
When you have taxable boot, the IRS taxes your depreciation recapture first at 25% — before capital gains rates apply to the remainder. This means even a small amount of boot can trigger significant recapture tax. If your accumulated depreciation is large (e.g., 15+ year commercial property), model your exact boot threshold in the calculator before accepting a price reduction or reduced mortgage on the replacement property.
Your taxable gain is calculated from Adjusted Basis, not your original purchase price. Adjusted Basis = Purchase Price + Capital Improvements − Accumulated Depreciation. Many investors are shocked by their actual gain because decades of depreciation deductions have lowered their basis far below what they expect. Pull your IRS depreciation schedule (Form 4562) from prior returns — do not rely on a calculator’s auto-estimate if your property had irregular improvements or cost segregation.
The 3.8% Net Investment Income Tax (NIIT) applies to the lesser of your net investment income or the amount by which your MAGI exceeds $200K (single) / $250K (MFJ). While a 1031 exchange defers the NIIT along with capital gains, the deferred NIIT accumulates and compounds in the basis carryover. High-income investors should model NIIT exposure on the replacement property’s eventual sale — especially if planning to sell outright rather than hold until death.
Over a dozen states — including California, New York, and Massachusetts — have non-resident withholding requirements and “clawback” provisions that may tax the deferred gain when you eventually sell the replacement property, even if you’ve moved to a no-tax state. California’s FTB Form 593 and NY’s IT-2663 are primary examples. If your exchange strategy includes a state-tax-exit move, this must be planned with a multistate CPA before executing the exchange.
Most investors focus on cash boot, but mortgage boot silently triggers taxes. If your relinquished property had a $500K mortgage and your replacement property only takes on $300K, you’ve been relieved of $200K in debt — the IRS treats this as $200K of boot received, fully taxable. The only clean fix: ensure your new mortgage equals or exceeds your old mortgage, or add cash to compensate. Model the mortgage scenario using the Boot Calculator module before negotiating financing.
Allowable closing costs paid from exchange funds on the replacement property reduce your boot. These include title insurance, escrow fees, recording fees, and loan origination fees. However, prorated property taxes, security deposits, and prepaid insurance are NOT exchange expenses — paying these from exchange funds creates cash boot. Have your QI and closing agent pre-approve every line item on the HUD-1/ALTA settlement statement before closing day.
For full deferral, you must satisfy two separate tests simultaneously: (1) replacement property price ≥ net sale price of relinquished property, AND (2) equity invested in replacement ≥ equity pulled from relinquished property. Passing only one test creates boot on the other. This is why you cannot buy a cheaper property and just put more cash in — the price must be equal or greater. Run both calculations in the calculator before negotiating the replacement purchase price.
If you sell a rental property with appliances, furniture, or personal property included in the sale price but not in the exchange (since the 2017 TCJA eliminated like-kind exchanges for personal property), the allocated value of that personal property becomes taxable boot. Always allocate value separately in the purchase agreement, and ensure the exchange covers only the real property component. This is common in furnished short-term rentals and mixed-use properties.
The QI industry is largely unregulated at the federal level. Several QI failures have resulted in investors losing their entire exchange funds (e.g., Okun fraud case — $160M lost). Choose a QI affiliated with a major bank, title company, or law firm with Fidelity Bond + E&O insurance. Ask for proof of insurance and ask whether exchange funds are held in segregated, FDIC-insured accounts — not commingled with the QI’s operating funds. Cost difference: $300–$500 more than a non-institutional QI.
The IRS defines “disqualified persons” who cannot act as your QI: your agent within the prior 2 years (attorney, CPA, real estate agent, employee), a related party (spouse, children, siblings, corporations or partnerships with more than 10% ownership). Using a disqualified person invalidates the exchange even if all other requirements are met. This rule catches many investors who ask their regular CPA or attorney to hold exchange funds as a cost-saving measure.
You must file IRS Form 8824 (Like-Kind Exchanges) with your tax return for the year the relinquished property closed — even if the replacement property closes in the following tax year. If the exchange spans two tax years, you may need to file Form 8824 in both years. The form calculates your recognized gain (boot), deferred gain, and the new basis for the replacement property. Attach a detailed worksheet if multiple properties are involved.
Because a 1031 exchange carries your deferred gain forward indefinitely, the IRS can audit not just the year of the exchange but also earlier years that established your adjusted basis (depreciation history, improvement records). Maintain permanent records of: the original HUD-1/ALTA, QI exchange agreement, property ID notice, replacement property closing docs, and all Form 8824 filings. The statute of limitations does not bar the IRS from examining basis if you eventually sell.
The ultimate 1031 strategy is to continue exchanging into ever-larger properties throughout your lifetime, then hold the final property until death. Under IRC §1014, your heirs receive a stepped-up basis equal to fair market value at date of death — all accumulated deferred gains (including depreciation recapture) are permanently and legally eliminated. No capital gains tax. No depreciation recapture. The deferred taxes simply disappear. This strategy is at the core of multi-generational real estate wealth building in the US.
For estate planning integration, holding your replacement property in a revocable living trust (grantor trust) or a single-member LLC does not disqualify the exchange — the IRS looks through these entities for 1031 purposes. However, title must remain consistent: if you relinquished as an individual, you must acquire as an individual or the same single-member LLC (not a partnership or corporation). Changing title structure mid-exchange is a common audit trigger and may invalidate the deferral.
The replacement property must be held for investment or productive use in a trade or business — not for personal use. If you move into it shortly after closing, the IRS may reclassify it as a primary residence and retroactively disqualify the exchange. The IRS Safe Harbor (Rev. Proc. 2008-16) requires you to hold the replacement property for at least 24 months, rent it at fair market rate for 14+ days in each 12-month period, and limit personal use to the lesser of 14 days or 10% of rental days in each period.
Exchanging with a related party (family member, controlled corporation, partnership with >50% common ownership) is permitted under IRC §1031(f), but requires both parties to hold their respective properties for at least 2 years after the exchange. If either party sells within 2 years, the original deferral is immediately recaptured and taxed in the year of the early sale. The 2-year clock is individually reset for each exchange, making serial related-party exchanges risky without careful planning.
US Real Estate Investor FAQs: 1031 Exchanges & Capital Gains
Complete answers to the 22 most common tax deferral, boot, and deadline questions.
A 1031 exchange (IRC Section 1031) allows US real estate investors to defer federal capital gains tax, depreciation recapture tax, and state capital gains tax when selling an investment property — by reinvesting all net proceeds into a “like-kind” replacement property.
The tax is not forgiven; it is deferred until you eventually sell the replacement property without doing another exchange. You must use a Qualified Intermediary (QI), identify replacement property within 45 days, and close within 180 days.
You can defer 100% of your tax liability if you execute a full exchange. This includes Federal Capital Gains Tax (0–20%), Depreciation Recapture (25%), Net Investment Income Tax (3.8% if applicable), and State Capital Gains Tax (0–13.3% depending on your state).
For a typical investor selling a $800,000 property with $300,000 of gain, the total tax deferred frequently exceeds $100,000–$150,000. Use the calculator above to find your exact deferral amount.
For real estate, “like-kind” is defined very broadly by the IRS. It simply means any real property held for investment or productive use in a trade or business. You do not have to exchange an apartment for an apartment.
You can exchange raw land for a strip mall, a single-family rental for a multi-family complex, or commercial office space for an industrial warehouse. Primary residences and properties meant for immediate flipping (fix-and-flips) do not qualify.
Boot is any non-like-kind property received in a 1031 exchange, and it is fully taxable in the year of the exchange. The two most common forms are cash boot and mortgage boot.
Cash boot occurs when you keep some of the sale proceeds instead of reinvesting them all. Mortgage boot occurs when your new debt is lower than your old debt. To avoid boot entirely, you must trade “equal or up” in both property value and equity.
If you sell a property with a $500,000 mortgage and buy a replacement property with only a $300,000 mortgage, the IRS considers you to have been relieved of $200,000 in debt. This “debt relief” is treated exactly like cash in your pocket — it is taxable mortgage boot.
You can offset mortgage boot by bringing outside cash to the closing table of the replacement property, but you cannot offset cash boot by taking on a larger mortgage.
There are two unforgiving deadlines that start the day your relinquished property closes:
1. The 45-Day Rule: You must formally identify your potential replacement properties in writing to your Qualified Intermediary by midnight of the 45th calendar day.
2. The 180-Day Rule: You must close on and take title to the replacement property by the 180th calendar day (or the due date of your tax return, including extensions, whichever is earlier).
No. Under normal circumstances, there are absolutely no extensions to either deadline. They are calendar days, meaning weekends and holidays are included. If Day 45 falls on a Sunday, your identification is still due that Sunday.
The only exception the IRS grants is if you are impacted by a Federally Declared Disaster (such as a hurricane or wildfire), in which case the IRS publishes specific relief notices extending the deadlines.
The 3-Property Rule is the most common identification method. It allows you to identify up to three potential replacement properties, regardless of their total fair market value.
You can ultimately purchase one, two, or all three of the identified properties to complete your exchange. Most investors identify a primary target and two backups in case the primary falls through.
If you want to identify more than three properties, you must use the 200% Rule. This allows you to identify an unlimited number of replacement properties, but their combined fair market value cannot exceed 200% of the value of the property you sold.
If you identify more than three properties and their combined value exceeds the 200% limit, your entire exchange is invalidated unless you meet the extremely strict 95% Rule (where you actually acquire 95% of everything you identified).
During the time you own a rental property, the IRS allows you to deduct depreciation from your taxable income. When you sell, the IRS requires you to “recapture” those deductions and pay tax on them at a flat 25% federal rate.
A full 1031 exchange defers this 25% recapture tax entirely. However, if your exchange generates taxable boot, the IRS taxes the boot at the 25% recapture rate before applying lower capital gains rates.
Yes, but it must be primarily an investment property, not for personal use. The IRS provides a safe harbor under Rev. Proc. 2008-16.
To qualify, you must have owned the property for at least 24 months, rented it at fair market rent for at least 14 days in each of the prior two years, and your personal use cannot have exceeded 14 days or 10% of the rental days per year.
Yes. If you choose to keep some of the cash proceeds or buy a replacement property that costs less than your net sale price, you are doing a partial exchange.
The portion you do not reinvest is taxable boot. The remaining reinvested portion still qualifies for tax deferral. Our calculator automatically handles partial exchanges and tells you exactly how much tax you will owe on the boot.
A Qualified Intermediary (QI) is an independent third-party company that holds your exchange funds so you never take “constructive receipt” of the money. If you touch the money, the exchange is void.
The IRS strictly defines who cannot be your QI (disqualified persons): you cannot use your personal CPA, your real estate attorney, your real estate agent, your employees, or family members. You must use an independent corporate QI.
Under IRC Section 1014, when a property owner dies, their heirs inherit the property with a “stepped-up” tax basis equal to its current fair market value. This permanently erases all deferred capital gains and depreciation recapture tied to the property.
This is the foundation of the “Defer, Defer, Die” wealth strategy. An investor can do multiple 1031 exchanges over their lifetime, never pay capital gains tax, and pass the entire portfolio to their heirs completely tax-free.
No. The IRS specifically states that real property located within the United States and real property located outside the United States are not like-kind. You must exchange domestic property for domestic property.
Yes, any tax-paying entity can do a 1031 exchange, including LLCs, C-Corps, S-Corps, and partnerships. However, there is a strict “same taxpayer” rule.
The exact entity that sells the relinquished property must be the exact entity that takes title to the replacement property. If “ABC LLC” sells the property, “ABC LLC” must buy the new one. (The only exception is single-member LLCs, which are disregarded entities for tax purposes).
Delayed (Standard): Sell your property first, QI holds funds, identify in 45 days, buy in 180 days.
Reverse: You buy the replacement property first before your old property sells. Requires an Exchange Accommodation Titleholder (EAT) to park title. Highly complex.
Improvement (Build-to-Suit): Use exchange funds to build or renovate the replacement property before taking title. All improvements must be finished within the 180-day window.
Your 1031 exchange immediately fails. The QI will return your funds on day 46 (or according to your exchange agreement timeline), and you will owe full capital gains and depreciation recapture taxes on the sale of the relinquished property in that tax year.
Yes, but you must first establish your initial intent was for investment. Most CPAs recommend renting the replacement property to an independent third party for at least 24 months to satisfy the IRS safe harbor.
If you convert it to a primary residence after 24 months, the 1031 deferral remains intact. However, complex recapture rules (IRC §121) apply if you ever sell it later.
For a standard delayed exchange involving one relinquished and one replacement property, institutional QIs typically charge $800 to $1,200. Smaller non-institutional QIs charge $600 to $800. Additional properties usually add $200–$400 each.
Reverse and Improvement exchanges are significantly more expensive — typically starting at $3,000 to $5,000+ because they require establishing an Exchange Accommodation Titleholder (EAT) LLC.
Yes. You must file IRS Form 8824 (Like-Kind Exchanges) with your federal tax return for the year the relinquished property was sold. This form calculates your recognized gain (taxable boot), deferred gain, and the new adjusted basis of your replacement property.
Our calculator provides a Form 8824 Reference Worksheet to help you and your CPA estimate these exact line items.
The USFinanceCalculators.com 1031 Exchange Calculator uses verified formulas based on IRS Form 8824 instructions, IRC Section 1031, Treas. Reg. 1.1031(k)-1, and 2026 federal/state tax rate schedules.
It accurately calculates 25% depreciation recapture, 3.8% NIIT, and boot matrices. However, results are estimates for educational purposes and do not constitute tax advice. Individual results vary based on entity structure and passive activity rules. Always consult a CPA.
This calculator models the most common IRC §1031 like-kind exchange scenarios for US real property. It is designed to help investors understand potential tax deferral amounts, boot exposure, deadline windows, and long-term compounding benefit. Results are mathematical estimates only.
- Does not constitute a qualified tax opinion or IRS ruling
- Does not account for passive activity loss rules (IRC §469) or at-risk rules (IRC §465)
- Does not model installment sale treatment under IRC §453
- Does not handle multi-asset, multi-property, or tenants-in-common (TIC) exchanges
- Does not account for foreign investment in US real property (FIRPTA)
- Does not reflect any post-2026 tax law changes (TCJA provisions currently set to expire)
- State tax rates shown are general rates — actual rates may vary by income, entity type, and residency
- Depreciation is auto-estimated using straight-line 27.5-year residential schedule — actual schedules may differ
The following calculations are mathematically verified against IRS Form 8824 instructions, Treas. Reg. 1.1031(k)-1, and standard CPA practice as of 2026:
- Adjusted Basis = Purchase Price + Capital Improvements − Accumulated Depreciation
- Total Gain = Net Sale Price − Adjusted Basis
- Depreciation Recapture at 25% (IRC §1250), applied before capital gains
- Federal Capital Gains Tax at 0%, 15%, or 20% based on income and filing status (TCJA 2026 thresholds)
- Net Investment Income Tax (NIIT) at 3.8% above MAGI thresholds (IRC §1411)
- State Capital Gains Tax using current 2026 rates for all 50 states + DC
- Boot Calculation — cash boot, mortgage boot (IRC §1031(b)) and tax on boot
- QI Fee Estimation by exchange type (Delayed, Reverse, Improvement/Build-to-Suit)
- Deadline Dates — Day 45 and Day 180 per Treas. Reg. 1.1031(k)-1(b) & (c)
- Wealth Projection — compounded portfolio value with and without exchange over a user-defined horizon
- Step-Up Basis Elimination at death under IRC §1014
- IRS Form 8824 Reference Worksheet — estimated Lines 12, 13, 15, 16, 18, 19, 25
| Calculation | Formula / Source | IRC Reference |
|---|---|---|
| Adjusted Basis | Purchase Price + Improvements − Accumulated Depreciation |
IRC §1011, §1012 |
| Total Realized Gain | Net Sale Price − Adjusted Basis (Amount Realized per §1001) |
IRC §1001 |
| Depreciation Recapture | Min(Accumulated Depreciation, Total Gain) taxed at 25% |
IRC §1250, §1(h)(1)(D) |
| Capital Gains Rate | 0% / 15% / 20% based on taxable income + gain vs. TCJA thresholds (MFJ: $94,050 / $583,750) | IRC §1(h), Rev. Proc. 2025-xx |
| NIIT | Net Inv. Income × 3.8% if MAGI > $200K (Single) / $250K (MFJ) |
IRC §1411 |
| Boot (Cash) | Max(0, Net Sale Price − Replacement Price − New Mortgage + Old Mortgage) |
IRC §1031(b), Form 8824 Line 18 |
| Boot (Mortgage Relief) | Max(0, Old Mortgage − New Mortgage) treated as cash received |
Treas. Reg. 1.1031(b)-1(c) |
| Deferred Gain | Total Realized Gain − Recognized Gain (Boot) |
IRC §1031(a), Form 8824 Line 25 |
| Carryover Basis | Replacement Price − (Deferred Gain) |
IRC §1031(d) |
| Wealth Projection | Reinvestment Capital × (1 + r)^n vs. After-Tax Proceeds × (1 + r_alt)^n |
IRS Pub. 550 (investment income) |
| Step-Up at Death | FMV at date of death becomes new basis; deferred gains permanently eliminated | IRC §1014(a)(1) |
| QI Fee Estimation | Institutional: $1,000 base; Reverse: min $3,000; Improvement: min $2,500; +$300/additional property; +$150 wire fees | Industry standard (FEA guidelines) |
How This Content Is Created
All calculator logic, educational content, pro tips, real-world examples, and methodology documentation on this page are authored and reviewed by USFinanceCalculators.com’s editorial team with reference to primary sources: the Internal Revenue Code, Treasury Regulations, IRS publications, and US Tax Court decisions. No content is generated by automated tools without human expert review.
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USFinanceCalculators.com does not receive compensation from Qualified Intermediaries, real estate brokers, law firms, or tax professionals featured or referenced on this page. QI cost estimates are based on publicly available industry data from the Federation of Exchange Accommodators (FEA) and do not represent an endorsement of any specific QI company. This site does not collect referral fees.
Update & Review Policy
This calculator and all associated content is reviewed for accuracy whenever the IRS updates applicable tax rates, threshold amounts (annually via revenue procedures), or when Congress enacts legislation affecting IRC §1031. The TCJA provisions currently set to sunset after 2025 are monitored closely and this tool will be updated upon enactment of any new tax legislation. Last full review: May 2026.
E-E-A-T & Accuracy Commitment
This page is designed in accordance with Google’s E-E-A-T (Experience, Expertise, Authoritativeness, Trustworthiness) guidelines for financial content. All calculations reference specific IRC sections, Treasury Regulations, and IRS revenue procedures. Formula citations are provided inline throughout the Pro Tips, Methodology, and FAQ sections. If you identify a calculation error, please contact us at our contact page.
All 1031 exchange calculations and educational content on this page are based on the following authoritative US government and regulatory sources. These links open official government websites — no affiliation or endorsement implied.
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