What is a 1031 exchange?

A 1031 exchange, named for Internal Revenue Code section 1031, lets you swap one piece of real property held for business or investment use for another like-kind property and defer the capital gains tax you would otherwise owe on the sale. Since the Tax Cuts and Jobs Act, section 1031 applies only to real property, not to personal or intangible property. You do not avoid the tax permanently; the gain rolls into the basis of the replacement property and is deferred until you sell that property in a taxable transaction.

What are the 45-day and 180-day deadlines for a 1031 exchange?

In a deferred exchange you must identify the replacement property in writing within 45 days after you transfer the property you gave up, and you must receive the replacement property within 180 days of that transfer or by the due date of your tax return including extensions, whichever is earlier. Both clocks start on the same day and run at the same time, so the 45-day identification window is part of the 180 days, not additional to it. Missing either deadline disqualifies the exchange and the full gain becomes taxable.

What is boot in a 1031 exchange and how is it taxed?

Boot is any non-like-kind value you receive in the exchange, most commonly cash you pocket or a net reduction in the debt you carry. You recognize gain to the extent of the boot, up to your total realized gain, and you can never recognize a loss. Boot is taxed first as unrecaptured section 1250 gain at 25 percent to the extent of the depreciation you claimed, then as long-term capital gain. Trading down in value or in mortgage debt is the usual way boot is created.

Can I do a 1031 exchange on my primary home?

No. Section 1031 applies only to real property held for use in a trade or business or for investment. A property used solely as your personal residence does not qualify. The tax break for a main home is the separate section 121 exclusion, which can exclude up to $250,000 of gain, or $500,000 for a married couple. A property can move between these categories over time, and a former rental converted to a residence can involve both rules, but you cannot use a 1031 exchange on a home you live in.

Does a 1031 exchange defer depreciation recapture?

Yes. When the exchange is fully deferred with no boot, the depreciation you claimed on the old property carries over and no recapture is triggered currently. The unrecaptured section 1250 gain rolls into the replacement property along with the rest of the deferred gain. If you receive boot, however, the recognized gain is characterized first as unrecaptured section 1250 gain and taxed at up to 25 percent, which is a higher rate than the long-term capital gains rate, so even a small amount of boot can carry a heavier tax cost than expected.

What happens to my basis in the replacement property after a 1031 exchange?

You take a substituted, or carryover, basis in the replacement property under section 1031(d). In the simplest case, the replacement basis equals its fair market value minus the gain you deferred. That lower basis is how the IRS preserves the deferred gain: because your basis is reduced by the deferred amount, you will pay tax on it later when you sell the replacement property, unless you exchange again. You generally continue depreciating the carried-over basis on the same schedule and depreciate any additional investment as new property.

Do I need a qualified intermediary for a 1031 exchange?

For a deferred exchange, yes in practice. If you take actual or constructive receipt of the sale proceeds, the transaction is a taxable sale, not an exchange. A qualified intermediary holds the proceeds between the sale of the old property and the purchase of the new one so that you never control the cash. Your own agents, such as your attorney, accountant, or real estate agent, and related parties are disqualified from serving as the intermediary. The intermediary also documents the 45-day identification and the 180-day receipt.

1031 Exchange Calculator | National Tax Tools

Swapping one investment property for another under Section 1031 defers the capital gains tax. See exactly how much gain you defer, how much taxable boot you recognize, your carryover basis in the new property, and the tax you keep working for you instead of sending to the IRS.

Your Exchange

Relinquished Property Sale Price ($)

The fair market value, or contract sale price, of the property you are giving up.

Adjusted Basis of Relinquished Property ($)

Original cost plus improvements, minus the depreciation you have claimed. Enter the value net of depreciation.

Accumulated Depreciation Taken ($)

Total depreciation deducted over the years. Any boot you recognize is taxed first as unrecaptured §1250 gain at 25 percent up to this amount. Enter 0 if none.

Exchange & Selling Costs ($)

Broker commissions, the qualified intermediary fee, title and recording costs. These reduce both your realized gain and any boot.

Replacement Property Purchase Price ($)

The value of the like-kind property you are acquiring. To defer all gain, this should equal or exceed your net sale price.

Debt Paid Off (old) ($)

Mortgage on the old property, retired at sale.

Debt Taken On (new) ($)

New mortgage on the replacement.

Cash Received (pocketed) ($)

Net cash you take out of the deal instead of reinvesting. Cash you keep is always taxable boot.

Capital Gains Rate

Long-term rate on gain above recapture.

State Tax Rate (%)

Your state rate on the gain, or 0.

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Enter your exchange details
to see deferred gain, taxable boot, your new basis, and the tax you save

Item	Rule	Authority
Eligible property	Real property held for business or investment	IRC §1031(a); TCJA 2017
Identification period	45 days after transfer of relinquished property	IRC §1031(a)(3)(A)
Exchange (receipt) period	180 days, or return due date, whichever is earlier	IRC §1031(a)(3)(B)
Gain recognized	To the extent of boot; no loss recognized	IRC §1031(b), (c)
Replacement basis	Substituted (carryover) basis	IRC §1031(d)
Depreciation-recapture rate on boot	Up to 25% (unrecaptured §1250 gain)	IRC §1(h)(1)(E)
Related-party holding period	Both parties must hold 2 years	IRC §1031(f)
US vs foreign real property	Not like-kind to each other	IRC §1031(h)
Reporting form	Form 8824, Like-Kind Exchanges	Form 8824 instructions (2025)
Reverse exchange safe harbor	Qualified Exchange Accommodation Arrangement	Rev. Proc. 2000-37

1031 Exchange Calculator

How This Calculation Works

Step 1: Realized Gain Confirmed

Step 2: Net Boot Received Confirmed

Step 3: Recognized (Taxable) Gain Confirmed

Step 4: Tax on the Boot Confirmed

Step 5: Deferred Gain and New Basis Confirmed

Step 6: The Comparison Illustrative

Quick Facts

Real-World Examples

Practitioner Insight (LMN Tax Inc.)

When This Estimate May Not Apply

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