A 1031 exchange defers — doesn’t eliminate — the capital gains tax due on selling investment real estate, by rolling the proceeds into a replacement property instead of cashing out.
How it works
The realized gain is the sale price minus the adjusted basis. Any cash or non-like-kind property received (“boot”) is taxed immediately even though the rest of the gain defers. The new property’s basis is its purchase price minus whatever gain was deferred into it.
What this does not include
Real 1031 exchanges have strict timing rules (a 45-day identification window, a 180-day closing window) and require a qualified intermediary — this calculator only computes the tax math, not exchange logistics or eligibility.
How to use this calculator
- Enter the adjusted basis and sale price of the property being sold.
- Enter the replacement property’s purchase price.
- Enter any cash taken out of the exchange (the boot), if any.
Frequently asked questions
Does a 1031 exchange eliminate the tax entirely?
No — it defers it. The deferred gain reduces the replacement property’s basis, so the tax resurfaces if that property is later sold without another exchange.
What is “boot”?
Any cash or non-like-kind property received in the exchange — it’s taxed in the year of the exchange even though the rest of the gain defers.
Does this apply to a personal residence?
No — per the IRS source, Section 1031 applies only to real property held for business or investment use, not property held primarily for sale or as a personal home.
