Calculate the capital gains tax you can defer with a 1031 exchange, plus the tax due on boot in a partial exchange and your 45- and 180-day deadlines.
1031 Exchange Formula
AB = PP + CI - D
RG = SP - SC - AB
TD = min(D,RG)*0.25 + (RG - min(D,RG))*CG + RG*SR + RG*NIIT
Recognized Gain = min(RG, Cash Boot + Mortgage Boot)
NB = RP - (RG - Recognized Gain)
- AB is the adjusted basis of the property you are selling ($)
- PP is the original purchase price ($)
- CI is the cost of capital improvements ($)
- D is the total depreciation you claimed ($)
- RG is the realized gain ($)
- SP is the sale price and SC is the selling costs ($)
- TD is the total tax deferred by a full exchange ($)
- CG is your federal capital gains rate (0%, 15%, or 20%) and SR is your state rate
- NIIT is the 3.8% net investment income tax, if it applies to you
- RP is the replacement property price and NB is your carryover basis in it ($)
The calculator has three modes built on these formulas. The full exchange mode computes your adjusted basis, realized gain, and the total tax a complete 1031 exchange defers, splitting it into depreciation recapture at 25%, federal capital gains tax, state tax, and NIIT. The partial exchange mode applies the boot formula: any cash you keep plus any net debt relief becomes taxable boot, and the recognized gain is taxed as recapture first, then at your capital gains rate. It also returns the carryover basis formula result, which is what your new property’s basis will be for future depreciation. The deadline mode adds 45 and 180 calendar days to your closing date to give the exact identification and purchase deadlines.
Tax Rates Deferred and State Clawback Rules
The first table shows the 2026 federal rates that apply if you sell an investment property outright instead of exchanging. These are the rates the calculator uses to estimate your deferral.
| Tax | Rate | Applies to (2026) |
|---|---|---|
| Long-term capital gains | 0% | Taxable income up to $49,450 single / $98,900 joint |
| Long-term capital gains | 15% | Up to $545,500 single / $613,700 joint |
| Long-term capital gains | 20% | Income above the 15% thresholds |
| Unrecaptured Section 1250 gain | Up to 25% | Gain attributable to depreciation taken |
| Net investment income tax | 3.8% | MAGI over $200,000 single / $250,000 joint |
The second table covers a rule most exchange guides skip: state clawback. A few states keep tracking the gain you sourced in their state even after you exchange into property elsewhere. If you later sell the replacement in a taxable sale, those states tax the original deferred gain, no matter where you live by then.
| State | Clawback rule |
|---|---|
| California | Must file Form FTB 3840 every year you defer; California taxes the original gain when the replacement is sold in a taxable sale |
| Oregon | Annual reporting of deferred Oregon-source gain; taxed when eventually recognized |
| Montana | Claims tax on Montana-source deferred gain at final taxable sale |
| Massachusetts | Claims tax on Massachusetts-source deferred gain at final taxable sale |
1031 Exchange Example Problems
Example 1: full exchange. You sell a rental for $800,000 with $48,000 in selling costs. You paid $500,000, added $50,000 in improvements, and claimed $150,000 of depreciation. Your adjusted basis is 500,000 + 50,000 – 150,000 = $400,000. Your realized gain is 800,000 – 48,000 – 400,000 = $352,000. At a 15% federal rate with a 5% state rate, the deferred tax is 150,000 * 0.25 + 202,000 * 0.15 + 352,000 * 0.05 = 37,500 + 30,300 + 17,600 = $85,400. To defer all of it, you must buy replacement property worth at least $752,000 and reinvest all of your equity.
Example 2: partial exchange with boot. Same sale, but you buy a $650,000 replacement, keep $50,000 in cash, and your new loan is $280,000 against an old payoff of $300,000. Cash boot is $50,000 and mortgage boot is 300,000 – 280,000 = $20,000, so total boot is $70,000. Recognized gain is min(352,000, 70,000) = $70,000, taxed first as recapture: 70,000 * 0.25 + 70,000 * 0.05 = $21,000 due now. The remaining $282,000 of gain stays deferred, and your carryover basis in the replacement is 650,000 – 282,000 = $368,000.
1031 Exchange Frequently Asked Questions
What are the 45-day and 180-day deadlines? You must identify replacement property in writing to your qualified intermediary within 45 calendar days of closing the sale, and you must close on the replacement within 180 calendar days. Both clocks run together from the same closing date, weekends and holidays count, and there are no extensions. The 180-day window ends early if your tax return due date arrives first, so if you close late in the year, file an extension to keep the full period.
Does a 1031 exchange eliminate the tax? No, it defers it. The deferred gain reduces your basis in the replacement property, so the tax comes due whenever you finally sell in a taxable sale. You can keep exchanging indefinitely, and if you hold the final property until death, your heirs currently receive a stepped-up basis that wipes out the deferred gain entirely. That combination is why the strategy is often summarized as swap until you drop.
What property qualifies as like-kind? Any real property held for investment or productive use in a trade or business can be exchanged for any other such real property in the United States: a rental house for raw land, an office for an apartment building. Your primary residence does not qualify, property held mainly for resale such as a fix-and-flip does not qualify, and since 2018 personal property like equipment or vehicles is excluded.
