1031 Exchange Calculator – Real Estate Capital Gains & Depreciation Recapture Tax Deferral

Calculate capital gains taxes and 25% depreciation recapture deferred through an IRS Section 1031 like-kind exchange. Identify taxable mortgage boot and replacement rules.

Relinquished Property Sale Price ($)

Original Purchase Basis + Capital Improvements ($)

Cumulative Depreciation Deducted ($)

Replacement Property Target Price ($)

Capital Gains Tax Rate (%)

Total Capital Gains Tax Deferred

$163,800

100% Section 1031 Tax Deferral

Total Realized Gain

$570,000

Including depreciation recapture

1031 Exchange Compliance Status: 100% TAX DEFERRED

25% Section 1250 Depreciation Recapture:$30,000 Deferred

Taxable Boot Created:$0 Boot (Full Deferral)

The Strict 45/180 Day Deadlines: You have exactly 45 calendar days from closing to formally identify replacement properties in writing, and exactly 180 calendar days to complete acquisition. Deadlines are statutory and cannot be extended.

Real estate investment and tax model for informational simulation only. Projections exclude localized property transfer taxes and unexpected capital expenditures. Consult a licensed real estate broker or CPA.

What is an IRS Section 1031 Like-Kind Exchange?

Under Section 1031 of the Internal Revenue Code, real estate investors can sell an appreciated investment or commercial property and defer 100% of federal capital gains taxes, state taxes, and depreciation recapture taxes by rolling all net sale proceeds into a like-kind replacement property.

The 4 Pillars of a 100% Tax-Deferred Exchange

Equal or Greater Value Rule: The purchase price of the replacement property must be equal to or greater than the net sales price of the relinquished property.
Reinvest All Cash Equity: All net equity from the sale must be reinvested. Any cash taken out is considered 'Cash Boot' and is subject to immediate taxation.
Equal or Greater Mortgage Debt: Debt on the replacement property must equal or exceed debt paid off on the relinquished property, otherwise 'Mortgage Boot' triggers tax liability.
Qualified Intermediary (QI) Mandate: Investors cannot touch or hold the sale funds. An independent Qualified Intermediary must hold funds in escrow.

Frequently asked questions

Can I exchange a rental home for an apartment building or land?

Yes! Under Section 1031, 'like-kind' is interpreted very broadly. Any real estate held for productive investment or business use can be exchanged for any other investment real estate (e.g. single-family rental for commercial retail or raw land).

Can I do a 1031 exchange on my primary residence?

No. Section 1031 applies strictly to investment or business properties. Primary residences are covered under IRC Section 121 ($250k / $500k capital gains exclusion).

What happens to deferred taxes upon death?

If you hold exchanged real estate until death, your heirs receive a full 'stepped-up basis' to fair market value under IRC § 1014, permanently erasing all lifetime deferred capital gains and depreciation recapture taxes.

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