1031 Exchange Calculator

Named after IRC Section 1031, a "like-kind exchange" lets you defer capital gains tax when selling investment real estate by reinvesting the proceeds in another investment property. Tax is deferred, not eliminated - when you eventually sell without exchanging, the deferred gain becomes taxable. Post-TCJA (2017), only REAL property qualifies; personal property exchanges were eliminated.

Two non-negotiable deadlines: (1) 45-day identification - within 45 calendar days of the sale closing, you must identify potential replacement properties in writing, sent to the Qualified Intermediary; (2) 180-day completion - closing on the replacement property must occur within 180 days of the original sale (or your tax return due date including extensions, whichever is earlier). Miss either deadline and the entire exchange fails.

You cannot touch the sale proceeds - even briefly - or the exchange is disqualified. A Qualified Intermediary (also called an Accommodator) holds the funds between sale and purchase. Banks, escrow companies, or specialized 1031 facilitators serve this role. Choosing a reputable, financially solid QI is critical - there have been QI bankruptcies where exchangers lost their money. Pick QIs with bonding and segregated client accounts.

Boot is anything you receive in the exchange that isn't like-kind property - cash, debt relief (replacing property has less debt), or non-real-estate value. Boot is taxable to the extent of your gain. Example: selling a $500K property with $200K mortgage and buying $450K replacement with $150K mortgage - the $50K cash you pocket AND the $50K mortgage reduction = $100K boot, partially taxable. Plan to "trade up" in both equity and debt to avoid boot.