1031 Exchange Tax Savings Calculator
A 1031 exchange lets you defer capital gains taxes when you sell an investment property and reinvest in a like-kind replacement. Use this calculator to see exactly how much tax you can defer — and how much additional equity you'll have to invest in your next property.
Tax Savings
Total Tax Deferred
$0
Tax Deferred = Depreciation Recapture + Capital Gains + State Tax
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How to Use This Calculator
1. Enter your sale details — the expected sale price, your original purchase price (cost basis), and the total depreciation you've claimed. Include selling costs like agent commissions and closing fees.
2. Set your tax rates — choose your federal capital gains rate (15% or 20%), and adjust the state tax rate for your state. Depreciation recapture is fixed at 25% by the IRS.
3. Enter the replacement property price — the property you plan to buy with the exchange proceeds. To defer all taxes, the replacement must be equal to or greater than your sale price.
4. Review your savings — the results panel shows your total tax deferred, a breakdown of each tax component, and a side-by-side comparison of selling with and without a 1031 exchange.
What Is a 1031 Exchange?
A 1031 exchange (also called a like-kind exchange or Starker exchange) is a tax strategy under Internal Revenue Code Section 1031. It allows you to sell an investment property and defer all capital gains taxes by reinvesting the proceeds into another “like-kind” property.
“Like-kind” is broadly defined for real estate — any investment or business property qualifies, regardless of property type. You can exchange an apartment building for raw land, or a retail center for a single-family rental. The key requirement is that both properties must be held for investment or business use.
The exchange must follow strict IRS timelines:
- 45-day Identification Period — you must identify up to three potential replacement properties within 45 calendar days of selling.
- 180-day Exchange Period — you must close on the replacement property within 180 calendar days of selling (or your tax return due date, whichever comes first).
For a deeper dive, read our complete guide to 1031 exchange rules.
Key Rules and Requirements
- Investment property only — 1031 exchanges apply to property held for investment or business use. Your primary residence and vacation homes (unless rented) do not qualify.
- Qualified Intermediary required — you cannot touch the sale proceeds. A Qualified Intermediary (QI) must hold the funds between the sale and purchase. Using a QI is not optional — it's required by the IRS.
- Boot triggers tax — if the replacement property costs less than the one you sold, the difference is called “boot” and is taxable. To defer 100% of the taxes, the replacement property must be equal to or greater in value than the sold property.
- Same taxpayer — the person or entity on the sale must be the same on the purchase. You can't sell from your personal name and buy in an LLC (or vice versa) without careful planning.
- Deferral, not elimination — a 1031 exchange defers taxes; it doesn't eliminate them. The tax basis carries over to the new property. However, many investors chain multiple 1031 exchanges over a lifetime and ultimately pass properties to heirs at a stepped-up basis, effectively eliminating the deferred gain.
For more on reducing your real estate tax burden, see our real estate tax strategies guide.