1031 Exchange Calculator — Estimate Your Capital Gains Tax Deferral

How a 1031 Exchange Defers Capital Gains Tax

Under Section 1031 of the Internal Revenue Code, an investor who sells investment or business real estate and reinvests the proceeds in like-kind property can defer federal capital gains tax, depreciation recapture, and the 3.8% Net Investment Income Tax that would otherwise be due at sale. The tax isn’t forgiven — your basis carries into the new property — but deferral keeps your full equity working for you instead of losing 20–35%+ of your gain to taxes at each sale. Investors who exchange repeatedly and hold until death may see deferred gains eliminated entirely through the step-up in basis their heirs receive.

This calculator estimates the total tax you could defer on a sale: federal long-term capital gains (0%, 15%, or 20% depending on income), 25% depreciation recapture on the depreciation you’ve taken, and NIIT where it applies. Texas investors have a structural advantage here — Texas imposes no state capital gains tax, so a properly executed exchange can defer essentially the entire tax bill.

What Does This 1031 Exchange Calculator Estimate?

The calculator answers one question: how much tax would you defer by exchanging instead of selling outright? It takes five inputs — sale price, original purchase price, capital improvements, depreciation claimed, and your filing status with estimated taxable income — plus your state and, optionally, your sale close date. From those it returns your adjusted basis, your total gain, and the four tax components that make up the deferral:

• Federal long-term capital gains tax on the appreciation portion of the gain, at 0%, 15%, or 20% depending on income.
• Depreciation recapture at up to 25% on the depreciation you have already claimed.
• Net Investment Income Tax at 3.8%, where your modified adjusted gross income exceeds the filing-status threshold.
• State capital gains tax, at the selected state’s top marginal rate.

Add your sale close date and the tool also produces your Day 45 identification deadline and Day 180 closing deadline with downloadable calendar reminders. Everything it returns is an estimate for educational purposes, not a tax opinion.

1031 Exchange Calculator Example: A $1,000,000 Sale

Here is a worked illustration using round numbers. It is not a projection, a recommendation, or a representation of any particular transaction — it exists to show how the arithmetic fits together. Your own figures will differ.

Assumptions: a Texas investment property sells for $1,000,000. It was purchased for $500,000, the owner made $50,000 of capital improvements, claimed $100,000 of depreciation over the hold, files married filing jointly, and has $250,000 of other taxable income. Texas has no state capital gains tax.

Step 1 — adjusted basis. Purchase price plus improvements minus depreciation: $500,000 + $50,000 − $100,000 = $450,000.

Step 2 — total gain. Sale price minus adjusted basis: $1,000,000 − $450,000 = $550,000.

Step 3 — split the gain. $100,000 of that gain is recaptured depreciation; the remaining $450,000 is appreciation.

Step 4 — apply the rates.

Step 5 — the deferral. A fully structured exchange — replacement property of equal or greater value, all net proceeds reinvested, debt replaced — defers the whole $135,900 rather than paying it at closing. The tax is deferred, not forgiven: your basis carries into the replacement property.

Enter those same numbers in the calculator above and you will see this breakdown reproduced. Change any input to model your own sale. These are simplified figures using top marginal rates; brackets, deductions, prior exchanges, installment treatment, and state-specific rules can all move the result, which is why the output is an estimate and your CPA has the final word.

What Is Boot, and How Is It Taxed in a Partial Exchange?

You don’t have to reinvest everything. In a partial 1031 exchange, you take some cash off the table and exchange the rest. The portion you keep — cash, or debt you don’t replace — is called boot, and it’s taxable in the year of sale. Boot is taxed at your capital-gains and recapture rates up to the amount of your total gain. Use the calculator’s reinvestment field to model different splits and see the estimated tax cost of pulling cash out versus fully deferring.

How Do You Calculate 1031 Exchange Dates? The 45- and 180-Day Deadlines

The two deadlines that sink more exchanges than anything else: 45 days from closing to identify replacement property in writing, and 180 days to complete the purchase. Both run concurrently from the day your sale closes, and neither can be extended.

To calculate them, treat your closing date as Day 0 and count calendar days forward — weekends and federal holidays do not push either date out, and the 180-day clock is not a fresh 180 days after identification, it includes the first 45. If your exchange straddles a tax year, the 180 days can also be cut short by your return due date unless you file an extension. Enter your sale close date in the calculator above to generate both dates. The timeline section above generates your exact deadline dates with downloadable calendar reminders, and our 1031 exchange timeline guide walks through each phase — including the identification rules (three-property, 200%, and 95% tests) and the most common timing mistakes. Wondering about fees? See what a 1031 exchange actually costs.

When Does a DST Make Sense as Replacement Property?

Investors who want to defer tax but are done with active management often exchange into a Delaware Statutory Trust (DST) — fractional, institutionally managed real estate that qualifies as like-kind replacement property. DSTs can also solve the 45-day identification problem, since inventory is typically available to identify and close quickly. Grace Capital Management helps accredited investors evaluate DST and other 1031 replacement options alongside broader tax strategies.

This tool and page are educational only and are not tax, legal, or investment advice. Consult your CPA or tax advisor about your specific situation. If you’d like to talk through an upcoming sale, contact us — initial conversations are without obligation.