What is boot in a 1031 exchange?

Boot is any cash or non-like-kind property you receive in the exchange. It's taxable. Boot commonly occurs when you trade down (replacement property costs less than relinquished) or when your new mortgage is smaller than your old one. To achieve full tax deferral, your replacement property must be equal or greater in value and you must replace all debt.

What taxes does a 1031 exchange defer?

A 1031 exchange defers federal long-term capital gains tax (0%, 15%, or 20% depending on income), depreciation recapture tax (25% under §1250), the 3.8% Net Investment Income Tax (NIIT) if applicable, and state capital gains tax. For a $200K gain with $50K depreciation, a typical investor defers $40,000-$70,000 in taxes.

1031 Exchange Calculator

Q: What are the 1031 exchange deadlines?

You have 45 calendar days from the closing of your relinquished property to identify up to 3 replacement properties. You must close on the replacement property within 180 calendar days or by your tax return due date (with extensions), whichever is earlier. These deadlines are strict — no extensions, even for weekends or holidays.

Q: Can I do a 1031 exchange on my primary residence?

No. §1031 only applies to property held for investment or business use — rental properties, commercial buildings, vacant land, etc. Your primary residence qualifies for the §121 exclusion ($250K single / $500K married) instead. However, if you convert a rental property to your primary residence (or vice versa), special rules apply regarding the time periods.

Calculate how much tax you defer with a like-kind exchange. See capital gains vs. depreciation recapture, check boot rules, get your 45/180-day timeline, and track basis carryover.

See how much tax you defer by using a 1031 exchange instead of selling outright

Selling price

Contract sale price of relinquished property

Adjusted basis

Original purchase price + improvements - depreciation

Depreciation taken

Total depreciation claimed on this property

Filing status

State income tax rate

CA: 9.3%, NY: 6.85%, TX/FL: 0%

Other taxable income

W-2, business income, etc. (affects LTCG bracket + NIIT)

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How to Use This Calculator

Tax Deferred tab

The default tab. Enter your selling price, adjusted basis, and depreciation taken. The calculator shows the full tax bill if you sell outright — federal LTCG, depreciation recapture (25%), NIIT (3.8%), and state tax — versus $0 via a 1031 exchange. Expand "More options" to set filing status, state tax rate, and other income (which affects your LTCG bracket and NIIT).

Exchange Rules tab

Enter your relinquished property value and replacement property value to check for boot. If you're trading down or reducing debt, the calculator flags the taxable boot amount. Set your closing date to see your exact 45-day identification and 180-day closing deadlines.

Basis Carryover tab

After a 1031 exchange, your old basis carries over. Enter your original basis, depreciation taken, and any new improvements. The calculator shows your carryover basis, annual depreciation, and cost segregation opportunities on improvements.

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The Formula

When you sell investment real property without a 1031 exchange, you owe four types of tax:

Total Tax = Federal LTCG + Depreciation Recapture + NIIT + State Tax

Federal LTCG = Capital Gain × LTCG Rate (0%, 15%, or 20%)
Depreciation Recapture = Depreciation Taken × 25% (§1250)
NIIT = 3.8% × min(Gain, MAGI − Threshold)
State Tax = Total Gain × State Rate

Capital Gain = Sale Price − Adjusted Basis − Depreciation
Adjusted Basis = Purchase Price + Improvements − Depreciation

A 1031 exchange defers all four taxes by reinvesting in like-kind real property. The key requirement: your replacement property must be equal or greater in value, and you must replace all debt. Any shortfall is "boot" and is taxable.

Basis carryover formula:

New Basis = Old Adjusted Basis + Boot Paid − Boot Received
Annual Depreciation = New Basis ÷ Property Life (27.5 or 39 years)

Example

Marcus — selling a rental duplex in Phoenix, AZ to buy a larger property

Marcus owns a rental duplex purchased for $350K in 2018. He's taken $65K in depreciation over 8 years. He's selling for $500K and buying a 4-unit apartment for $650K. He files single with $120K W-2 income. Arizona state tax: 2.5%.

Tax Deferred tab

Selling price$500,000

Adjusted basis$350,000

Depreciation taken$65,000

Total gain$150,000

Federal LTCG tax (15%)$12,750

Depreciation recapture (25%)$16,250

NIIT (3.8%)$2,660

State tax (2.5%)$3,750

Total tax if sold outright$35,410

By doing a 1031 exchange into the $650K apartment, Marcus defers $35,410 in taxes and keeps that money working in his new property.

Exchange Rules tab

Relinquished property$500,000

Replacement property$650,000

Boot$0

ResultFull deferral

Marcus is trading up ($650K > $500K), so there's no boot. Full tax deferral. His 45-day ID deadline and 180-day closing deadline are calculated from the duplex closing date.

Basis Carryover tab

Original basis$350,000

Less depreciation-$65,000

Carryover basis$285,000

Annual depreciation (27.5 yr)$10,364/yr

Marcus's $285K basis carries over to the new apartment. The $150K in improvements (difference between purchase prices) can be depreciated fresh. A cost segregation study could accelerate ~30% of improvements into 5-7 year property.

FAQ

What is a 1031 exchange? ▼

A 1031 exchange (like-kind exchange) under IRC §1031 lets you defer capital gains taxes when you sell investment real property and reinvest the proceeds into similar real property. Since the Tax Cuts and Jobs Act of 2017, only real property qualifies — personal property, equipment, and vehicles are excluded. The OBBBA (2025) preserved §1031 with no changes. You can chain exchanges indefinitely, deferring taxes until you eventually sell without exchanging.

What are the 1031 exchange deadlines? ▼

You have 45 calendar days from closing on your relinquished property to identify up to 3 replacement properties (the "3-property rule"). Alternatively, you can identify any number of properties if their total value doesn’t exceed 200% of the relinquished property. You must close within 180 calendar days or by your tax return due date (with extensions), whichever is earlier. These deadlines are strict — no extensions for weekends, holidays, or natural disasters.

What is boot and how do I avoid it? ▼

Boot is any cash or non-like-kind property you receive in the exchange — and it’s taxable. Common sources: trading down (replacement costs less than relinquished), reducing your mortgage without adding equivalent cash, or receiving personal property in the deal. To avoid boot: buy replacement property of equal or greater value, replace all debt with new debt or cash, and don’t take any cash out of the exchange. A Qualified Intermediary (QI) must hold all proceeds.

Can I 1031 exchange my primary residence? ▼

No. §1031 only applies to property held for investment or business use — rental properties, commercial buildings, vacant land, farmland, etc. Your primary residence qualifies for the §121 exclusion ($250K single / $500K married) instead. Partnership interests are also excluded from §1031. However, you can convert a rental to a primary residence or vice versa, subject to special time-period rules.

What happens to depreciation in a 1031 exchange? ▼

Accumulated depreciation carries over to the replacement property. Your new property’s basis = old adjusted basis (original cost minus depreciation taken) plus any boot paid minus boot received. This lower basis means you continue depreciating from where you left off. When you eventually sell without exchanging, the total accumulated depreciation across all exchanges is recaptured at 25% (§1250). New capital improvements, however, get a fresh depreciation schedule starting from Day 1.

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