1031 Exchange Calculator 2026
The tax on selling an investment property — depreciation recapture at up to 25%, long-term gains at 15/20%, 3.8% NIIT and state — versus deferring it all with a 1031 exchange, with the equal-value / equal-debt check, boot, carried-over basis and extra buying power.
| Adjusted basis | — |
|---|---|
| Total gain | — |
| Depreciation recapture (max 25%) | — |
| Long-term capital gain (0/15/20%) | — |
| Net investment income tax (3.8%) | — |
| State tax | — |
| Total tax if you sell outright | — |
| Cash left after tax (sell) | — |
| 1031 exchange — tax deferred | — |
| Exchange requirements check | — |
| Boot (taxable part of the exchange) | — |
| Basis carried into the new property | — |
| Extra buying power from deferral | — |
In short
Selling an investment property triggers depreciation recapture at up to 25%, long-term capital gains at 15–20% (2026 15% band to $545,500 single / $613,700 joint), 3.8% net investment income tax above $200,000 / $250,000 of MAGI, and state tax. A 1031 exchange defers all of it if you buy like-kind real estate of equal or greater value, reinvest all equity and replace the debt, identifying within 45 days and closing within 180 through a qualified intermediary; any cash or debt relief taken is taxable boot.
Who this is for: US investors selling appreciated rental or commercial property.
What a 1031 exchange saves — and its rules
- Three taxes on a sale: depreciation recapture (unrecaptured §1250 gain) at your ordinary rate up to 25%; long-term capital gains at 0/15/20% (2026 15% band to $545,500 single / $613,700 joint); and 3.8% net investment income tax above $200,000 / $250,000 of MAGI — plus state tax in most states.
- Full deferral needs: replacement value ≥ net sale price, all net equity reinvested, and new debt ≥ old debt (or extra cash to offset). Any shortfall is "boot" and is taxed first.
- Deadlines: 45 days to identify (three-property, 200% or 95% rules), 180 days to close, both from the sale date and not extendable.
- Basis: the old adjusted basis carries over, plus any extra paid — so depreciation on the new property is smaller than on a fresh purchase. Combine with a cost segregation study to restore first-year deductions.
- Long game: swap until you drop — repeated exchanges followed by a stepped-up basis at death can eliminate the deferred gain altogether.
Assumptions
- Gain = sale − selling costs − (basis − depreciation); recapture = lesser of gain and depreciation, taxed at ordinary rates stacked on other income, capped at 25%.
- Remaining gain at 0/15/20% stacked above other income + recapture; NIIT 3.8% on gain above $200,000 / $250,000 MAGI; state at the flat rate.
- Boot = equity not reinvested + debt relief not offset by added cash; new basis = old adjusted basis + (new price − net sale price) + boot.
Worked example
Adjusted basis $380,000; net proceeds $846,000; gain $466,000. Recapture $120,000 → about $27,572 (22–24% ordinary rates, under the 25% cap); long-term gain $346,000 → $52,015 (15%, with a sliver at 20% above $613,700); NIIT on the gain above $250,000 of MAGI → about $13,908; state $23,300. Total tax $116,795 (25.1% of the gain), leaving $429,205 of cash after paying off the mortgage. With a full 1031 exchange into the $1.2 million property (greater value, greater debt) the entire $116,795 is deferred, the carried-over basis is $734,000, and the deferred tax buys roughly $467,000 more property at 75% LTV.
Frequently asked questions
How is depreciation recapture taxed?
Unrecaptured §1250 gain — the depreciation you took on real estate — is taxed at your ordinary rate up to a 25% maximum, before the rest of the gain gets 15–20% capital gains rates.
What is boot in a 1031 exchange?
Any cash you take out, or debt you do not replace, when buying the replacement property. Boot is taxable up to the amount of gain; the rest stays deferred.
Can I 1031 exchange my primary residence or a flip?
No — only property held for investment or business use. A home sale uses the §121 exclusion instead; flips are dealer inventory.
What are the 45 and 180 day rules?
Identify replacement property in writing within 45 days of the sale and close within 180 days (or your tax-return due date, if earlier). No extensions.
Does the state follow 1031?
Most do; Pennsylvania did not until 2023 and some states (California) require ongoing reporting when you exchange out of state.
Can I exchange into a DST or multiple properties?
Yes — Delaware statutory trust interests qualify, and you can identify up to three properties (or more under the 200% rule).
Related calculators
See all United States calculators → · All free online calculators
Found an error? Report it — tell us the inputs, the result you got, what you expected and the rule or source. Confirmed corrections are published within a week.
Ready to build your next digital solution?
Send the brief and you get a scoped response with approach, milestones and a fixed price range. Not a sales call.
A 30-minute call with the engineer who would run your project
Within 2 business daysA written scope: approach, module breakdown, milestones, fixed price range
Within 5 business daysYou decide. No retainer, no obligation, and the scope document is yours to keep either way
Your timelineSend your brief
Three fields to start. Add project details if you have them.