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1031 Exchange Calculator

Estimate your potential tax savings and replacement property requirements for a 1031 exchange. This calculator helps you make informed decisions about your real estate investment strategy.

Property Details
Enter your current property information to calculate potential savings

Include realtor fees, closing costs, etc.

Typically 15-20% for long-term capital gains

Exchange Analysis
Enter your property details on the left and click Calculate to see your potential 1031 exchange benefits

You'll see information about:

  • • Potential tax savings
  • • Required purchase price
  • • Available equity to reinvest
  • • Recommended property value
1. Cost Basis Calculation
Understanding your adjusted basis

Your adjusted basis is calculated using:

  • Original purchase price
  • Capital improvements (renovations, upgrades, major repairs)
  • Depreciation claimed over the years

Formula:

Adjusted Basis = Original Purchase Price + Capital Improvements − Depreciation

2. Reinvestment Amount
Calculate how much you need to reinvest

To determine your reinvestment amount, consider:

  • Property selling price
  • Selling costs (commissions, fees)
  • Outstanding mortgage balance

Formula:

Net Sales Proceeds = Selling Price − Selling Costs − Mortgage Balance

3. Tax Savings Calculation
Understand your potential tax savings

Your tax savings calculation includes:

  • Capital gains tax (typically 15-20%)
  • Depreciation recapture tax (25%)

Formula:

Capital Gain = Selling Price − Adjusted Basis − Selling Costs

Total Tax Liability = (Capital Gain × Tax Rate) + (Depreciation × 25%)

Calculation Example
Real-world example of a 1031 exchange calculation

Given Information:

  • Original purchase price: $1,000,000
  • Capital improvements: $250,000
  • Property held for 5 years
  • Selling price: $2,000,000
  • Selling costs: $150,000
  • Outstanding mortgage: $685,000
  • Capital gains tax rate: 20%

Calculations:

1. Adjusted Basis: $1,250,000 (Purchase price + Improvements)

2. Net Proceeds from Sale: $1,850,000 (Selling price - Costs)

3. Capital Gain: $600,000

4. Capital Gains Tax (if no 1031): $120,000

Result:

To defer capital gains taxes using a 1031 exchange, you must reinvest $1,850,000 into a like-kind property. If you do not complete a 1031 exchange, your tax liability will be $120,000 at a 20% capital gains tax rate.

Important Note About Depreciation Recapture
Understanding depreciation recapture tax calculation

When calculating depreciation recapture tax, you need to:

  1. Determine total depreciation claimed over the years
  2. Take the lesser of:
    • Total depreciation claimed
    • Total capital gain on the property
  3. Multiply the recapture amount by 25% (standard IRS rate)

Example:

If you claimed $200,000 in depreciation and your total capital gain is $250,000, your depreciation recapture would be $200,000 × 25% = $50,000 in additional tax liability.