1031 Like-Kind Exchange Calculator
A like-kind exchange under IRC Section 1031 allows real estate investors to defer the recognition of capital gains when selling one investment or business property by reinvesting the proceeds into a replacement property of equal or greater value. Since 2018, the Tax Cuts and Jobs Act limits Section 1031 to real property only; personal property no longer qualifies. The seller has 45 days from closing on the relinquished property to formally identify one or more replacement properties, and must complete the purchase of the replacement property within 180 days of the sale. The portion of sale proceeds not reinvested in like-kind real property, including cash received, non-like-kind property, or net mortgage relief (when the new mortgage is smaller than the old mortgage), is called boot. Any boot received triggers recognition of gain up to the boot amount, and that recognised gain is taxable in the year of the exchange. The remaining (deferred) gain is embedded in the cost basis of the replacement property, which is reduced by the deferred gain. This calculator takes the sale price, selling costs, and adjusted basis of the relinquished property, together with the old and new mortgage balances, any cash boot received, and the replacement property purchase price. It outputs the realised gain, boot received, recognised gain, tax on that gain, deferred gain, and your adjusted basis in the new property.
Selling at $850,000 with a basis of $320,000 creates a realized gain of --. In a fully tax-deferred 1031 exchange, zero tax is due now.
How 1031 exchange calculations work
A 1031 exchange allows you to defer capital gains tax by reinvesting the proceeds into like-kind property. The key is to understand realized gain, boot, recognized gain, and deferred gain.
Realized gain = sale price - selling costs - adjusted basis
Boot = cash received + (old mortgage - new mortgage)
Recognized gain = min(realized gain, boot)
Deferred gain = realized gain - recognized gain
New basis = purchase price - deferred gain
If you receive no boot and reinvest all proceeds plus additional capital, the entire gain is deferred and taxes are postponed indefinitely (until you eventually sell without a 1031 exchange).
Worked example
Sale price $850,000, selling costs $50,000, basis $320,000, old mortgage $400,000, new price $900,000, new mortgage $450,000:
- Net sale proceeds = 850,000 - 50,000 = $800,000
- Realized gain = 800,000 - 320,000 = $480,000
- Mortgage relief = 400,000 - 450,000 = -$50,000 (you took on more debt, so zero boot)
- Boot received = 0 + 0 = $0
- Recognized gain = min(480,000, 0) = $0
- Deferred gain = 480,000 - 0 = $480,000
- New basis = 900,000 - 480,000 = $420,000
Planning a successful 1031 exchange
A 1031 exchange is one of the most powerful tax tools available to real estate investors. By deferring capital gains indefinitely, you can compound growth within the investment without tax drag. However, success requires careful planning and strict adherence to IRS rules.
Key planning points: (1) Use a qualified intermediary from day one of your sale. (2) Identify replacement properties within 45 days of closing. (3) Close on replacement property within 180 days. (4) Ensure replacement property is like-kind (all real estate is like-kind post-2017, but real estate to personal property does not qualify). (5) Document all transactions carefully. (6) Reinvest at least enough to defer all gain (to owe zero tax).
If you want to diversify out of real estate or access the gains at some point, you can do so tax-free when you are ready, and that transaction will be taxable. Until then, successive 1031 exchanges allow indefinite tax deferral, compounding your wealth tax-free.
1031 like-kind exchange calculator: frequently asked questions
What is a 1031 like-kind exchange and why use it?
A 1031 like-kind exchange, named after IRC Section 1031, allows you to defer capital gains tax when you sell one property and reinvest in a similar property. Instead of paying tax on the gain immediately, you can roll the proceeds into the new property, deferring tax until you eventually sell for cash. Since the Tax Cuts and Jobs Act of 2017, only real property (real estate) qualifies. Personal property (equipment, vehicles) no longer qualifies. Real estate to real estate exchanges qualify regardless of type: commercial to residential, office to apartment, etc.
What are the critical deadlines in a 1031 exchange?
There are two strict deadlines both measured from the closing of the relinquished (sold) property: (1) The 45-day identification deadline: you must identify in writing which replacement property (or properties) you intend to purchase. You can identify up to three properties without limit, or more than three if the total value does not exceed 200% of the relinquished property's value. (2) The 180-day closing deadline: you must close on the replacement property and complete the exchange. Both deadlines are rigid; the IRS rarely grants extensions. Missing either deadline disqualifies the exchange and triggers immediate tax on the gain.
What is boot and how does it affect the exchange?
Boot is any cash or non-like-kind property you receive in the exchange. If you receive boot, you must recognize gain up to the boot amount, even in a 1031 exchange. For example, if you have a $100,000 gain and receive $20,000 in cash (boot), you recognize $20,000 in gain and defer $80,000. Boot can be: cash received, FMV of non-like-kind property received, or net mortgage relief (if your old mortgage exceeds the new mortgage, the difference is boot received).
What is adjusted basis in the new property?
The adjusted basis in the replacement property is calculated as: purchase price of new property minus the deferred gain. Alternatively: cost of new property + gain recognized - boot received. This ensures that the unrecognized gain is preserved in the new property. When you eventually sell the new property, the deferred gain plus any additional gain will be taxable at that time.
What if the replacement property costs more than the relinquished property?
If you reinvest more than the net proceeds from the sale, no additional gain is recognized. The additional cash you invest increases the basis in the new property without tax consequences. This is often the goal: use the 1031 exchange to defer the gain and invest additional capital in a larger property.
Can I do a 1031 exchange of my personal residence?
No. A 1031 exchange is for business or investment property only. Personal residences do not qualify. However, if you own a rental home, vacation home, or other investment real estate, a 1031 exchange is available. The gain on a personal residence can be excluded from tax (up to $250,000 for single filers, $500,000 for married filing jointly) under IRC Section 121, but that is different from a 1031 exchange.
Do I need to use a qualified intermediary?
Yes. To qualify for a 1031 exchange, you must use a qualified intermediary (QI) to hold the proceeds between the sale and purchase. You cannot hold the cash yourself; if you do, the IRS treats it as a taxable sale, not a deferred exchange. A qualified intermediary is a third party (typically a law firm or specialized company) that facilitates the exchange. Using a QI is mandatory and adds a small cost (typically $500 to $1,500).
Official sources
- IRS Publication 544 (Sales of Assets): Publication 544.
- IRS Topic 703 (1031 Exchanges): Topic 703.
- IRC Section 1031 (statute governing like-kind exchanges).
- IRS Form 8949 (Sales of Capital Assets): Form 8949.
Reviewed by the CalculatorHub team, edited by James Graham, 13 June 2026. See our methodology. General information, not financial advice.