1031 Exchange Calculator — Defer Capital Gains on Like-Kind Swaps

A 1031 exchange lets you defer capital gains tax by rolling proceeds into a like-kind property. This guide models the tax saved, the 45-day/180-day clocks, and depreciation recapture.

A 1031 exchange calculator shows the tax you defer by swapping one investment property for another under IRC §1031. Instead of paying capital-gains and recapture tax on a sale, you roll the gain into a replacement property and keep compounding. This guide models the savings.

How a 1031 Works

Sell a rental, identify a like-kind replacement within 45 days, and close within 180 days. Use a qualified intermediary to hold proceeds (you never "touch" the cash). The gain is deferred, not forgiven — it transfers to the new basis.

The Tax Deferred

On a $300,000→$520,000 sale with $212,000 gain:

A 1031 defers all of it. On a $212,000 gain at ~20% blended federal + 5% state, that is roughly $53,000 kept working instead of sent to the IRS.

Depreciation Recapture in the Exchange

Recapture (up to 25% on §1250) is also deferred in a 1031 — it surfaces only when you finally cash out (or step-up at inheritance). This is why 1031 is the cornerstone of the "swap 'til you drop" strategy. See the depreciation calculator for the recapture mechanics.

The Deadlines Are Non-Negotiable

• 45 days: identify up to 3 replacement properties (or more under the 200% rule).
• 180 days: close on the replacement.

Miss either and the exchange fails — the full gain becomes taxable. Build a buffer; donors and title companies slip.

Like-Kind Breadth

"Like-kind" is broad: any US investment real estate for any other (residential rental, commercial, vacant land, NNN). You cannot swap into a primary residence or stocks.

Boot — The Taxable Slip

If you receive cash or debt relief ("boot"), that portion is taxable. A smaller replacement loan than the old one creates mortgage boot. Model the exact debt to avoid surprise tax.

When a 1031 Beats Paying Tax

If you'd owe $53,000 and reinvest the full proceeds, the deferred tax compounds. Over 20 years at 7%, $53,000 grows to ~$205,000 — the real value of deferral. Paying tax locks in the loss of that compounding.

The Three Identification Rules (Pick One)

"Identify within 45 days" hides a choice among three commonly used identification methods, and picking the wrong one voids the exchange. The 3-property rule lets you name up to three candidate replacements of any value — the default for most investors because it is simple and forgiving. The 200% rule lets you name more than three properties as long as their combined value does not exceed 200% of what you sold — useful when diversifying one sale into several small rentals. The 95% rule allows unlimited identifications but only works if you actually close on at least 95% of the total identified value — rarely used because one failed closing kills the whole exchange. Identification must be in writing, signed, and delivered to your qualified intermediary by midnight of day 45; a property not on that list cannot be substituted in later, no matter how good the deal.

Reverse & Improvement Exchanges

The standard "sell first, buy second" order is not the only structure. In a reverse exchange (Rev. Proc. 2000-37 safe harbor), an exchange accommodation titleholder parks the replacement property so you can buy before you sell — powerful in a fast market where the replacement would not wait, but it roughly doubles intermediary fees and still runs on the same 45/180-day clocks in mirror image. An improvement (build-to-suit) exchange lets exchange funds pay for construction on the replacement, but only work completed and in place by day 180 counts toward the exchange value — you cannot bank future renovations. Both variants cost more ($3,500–$7,500+ in accommodator fees versus ~$1,000–$1,500 for a standard delayed exchange) and demand earlier planning, so price them into the deal before committing.

Choosing the Qualified Intermediary — the Unregulated Weak Link

Your sale proceeds sit with the qualified intermediary for up to six months, and the QI industry is lightly regulated in most states — QI failures and misappropriations have cost exchangers their entire proceeds in past downturns. Screen for: segregated, dual-signature escrow accounts (not commingled operating funds); a fidelity bond and errors & omissions coverage you can verify; institutional backing or membership in the Federation of Exchange Accommodators; and years of operating history through at least one market cycle. Also remember the disqualified-person rule: your own attorney, CPA, or agent who served you within the prior two years generally cannot act as your QI. Line the QI up before listing the property — once the sale closes with proceeds in your hands, even for a moment, the exchange is dead.

Using the Calculator Below

Enter original price, selling price, costs, land, holding years, new price, and tax brackets. The tool estimates deferred federal + state tax and the 180-day deadline. Load the sample to see a typical deferral.

Disclaimer: 1031 rules are strict and fact-specific. This estimates only; engage a qualified intermediary and CPA (IRC §1031, Rev. Proc.).

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