1031 Exchange Savings Calculator
Estimate capital gains tax savings when using a 1031 like-kind exchange to defer taxes on the sale of investment property.
Agent commissions, transfer taxes, etc.
Total depreciation claimed during ownership. Taxed at 25% recapture rate.
Tax Rates
15% or 20% depending on income (2026)
Your Results
Enter property sale details to estimate your 1031 exchange savings.
What This Calculator Does
This 1031 exchange savings calculator estimates the total capital gains taxes you can defer by executing a like-kind exchange under IRC Section 1031 when selling investment real estate. It accounts for federal long-term capital gains tax, the 3.8% Net Investment Income Tax (NIIT), state capital gains tax, and depreciation recapture tax at the 25% federal rate.
The Formula
Capital gain is the net sale price (sale price minus selling costs) minus the adjusted basis (original purchase price plus improvements minus accumulated depreciation). Depreciation recapture applies to the lesser of total depreciation claimed or total capital gain, taxed at a flat 25% federal rate. The remaining gain is taxed at your applicable long-term capital gains rate (15% or 20% in 2026). High earners also owe the 3.8% NIIT on investment income.
Step-by-Step Example
Calculate adjusted basis
Original purchase of $300,000 plus $25,000 improvements minus $40,000 depreciation gives an adjusted basis of $285,000.
Determine capital gain
Sale price of $500,000 minus $30,000 selling costs gives $470,000 net. Capital gain: $470,000 - $285,000 = $185,000.
Compute taxes without exchange
Depreciation recapture: $40,000 x 25% = $10,000. Federal cap gains: $145,000 x 20% = $29,000. NIIT: $185,000 x 3.8% = $7,030. State: $185,000 x 5% = $9,250. Total: $55,280.
Compare with 1031 exchange
With a 1031 exchange, all $55,280 in taxes are deferred. You invest the full $470,000 net proceeds into your replacement property.
Real-World Use Cases
Portfolio Upgrading
Sell a smaller property and exchange into a larger or higher-quality asset without losing capital to taxes.
Geographic Relocation
Exchange a property in one state for investment property in another state while deferring the tax bill.
Estate Planning
Continue executing 1031 exchanges throughout your lifetime. Heirs receive a stepped-up basis at death, potentially eliminating the deferred gains permanently.
Common Mistakes to Avoid
Missing the 45-day identification deadline. You must identify potential replacement properties in writing within 45 calendar days of closing the sale.
Missing the 180-day closing deadline. The replacement property purchase must close within 180 days of the relinquished property sale.
Taking constructive receipt of funds. Sale proceeds must go to a qualified intermediary. If you receive or control the funds at any point, the exchange is disqualified.
Exchanging into property you intend to use as a personal residence. Section 1031 applies only to property held for investment or business use.
Frequently Asked Questions
Accuracy and Disclaimer
This calculator provides estimates for educational purposes only. 1031 exchange rules are complex and strictly enforced by the IRS. Errors in execution can disqualify the exchange entirely. Always work with a qualified intermediary, tax advisor, and real estate attorney.
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