1031 Exchange Calculator
The LV5 Capital 1031 Exchange Calculator estimates the federal capital gains tax, depreciation recapture, net investment income tax (NIIT), and state taxes that a real estate investor can defer by completing a Section 1031 like-kind exchange instead of a taxable sale. Inputs include sale price, original cost basis, accumulated depreciation, selling cost percent, federal capital gains rate, state income tax rate, NIIT rate, and depreciation recapture rate. Outputs include the total tax deferred via 1031, total gain on sale, adjusted cost basis, depreciation recapture tax, federal capital gains tax, NIIT, state tax, and the increased purchasing power available for the replacement property.
Frequently asked questions
What is a 1031 exchange?
A 1031 exchange (named after IRS Section 1031) lets a real estate investor defer federal capital gains taxes and depreciation recapture by reinvesting the proceeds from the sale of one investment property into another like-kind investment property. Strict timelines apply: 45 days to identify replacement property, 180 days to close.
How much can I save with a 1031 exchange?
On a typical $500K gain, a fully successful 1031 exchange can defer roughly 20% federal long-term capital gains tax + 25% depreciation recapture on accumulated depreciation + 3.8% net investment income tax + state tax (varies). The total deferred liability often equals 25-40% of the gain. The deferred basis carries forward into the new property.
What are the 1031 exchange rules?
Both properties must be held for investment or productive use in trade or business (not personal residences). Replacement property must be identified in writing within 45 days of the sale closing. Purchase must close within 180 days. A Qualified Intermediary must hold the proceeds — the seller cannot touch the cash. Replacement value must equal or exceed the sale value to fully defer taxes.
What is boot in a 1031 exchange?
Boot is any non-like-kind value the seller receives in the exchange — usually cash, debt relief, or personal property. Boot is taxable in the year of the exchange to the extent of the gain. Common sources of boot are buying down to a smaller property, taking cash off the table, or reducing leverage on the replacement.
Can I 1031 into a syndication?
Generally no — a typical syndication LP interest is a partnership interest, which the IRS does not treat as like-kind real property. However, certain structures qualify: Delaware Statutory Trust (DST) interests, Tenant-in-Common (TIC) interests, and some 721 UPREIT contributions. Always confirm with the sponsor and your CPA before relying on 1031 treatment.
What are the alternatives to a 1031 exchange?
Alternatives include Delaware Statutory Trusts (DSTs) for fully passive 1031 replacement, Qualified Opportunity Zone funds (defer + reduce + potentially eliminate gains), installment sales under IRC Section 453, partial exchanges with planned boot, and the lazy 1031 strategy of using fresh K-1 depreciation from a new syndication to offset gain on the prior sale.
What happens if a 1031 exchange fails?
If you miss the 45-day identification window, the 180-day close window, or fail any other 1031 requirement, the original sale becomes fully taxable in the year of sale. You'd owe federal capital gains tax, depreciation recapture, the 3.8% NIIT, and state tax on the entire deferred gain — all due by the next April 15.
How does a reverse 1031 exchange work?
In a reverse 1031, you acquire the replacement property before selling the relinquished property. An Exchange Accommodation Titleholder (EAT) holds title to one of the properties (typically the replacement) until the sale closes. Same 45/180-day clocks apply, but they run from the EAT's acquisition. Reverse exchanges are more expensive and complex but useful in tight markets.
Other calculators
Explore the rest of LV5 Capital's investor calculator suite: Real Estate ROI Calculator · Real Estate IRR Calculator · Equity Multiple Calculator · Cash-on-Cash Return Calculator · 1031 Exchange Calculator. Read more in the multifamily investing guide or schedule a consultation.