What is a 1031 exchange in real estate?

A tax-deferred exchange where you sell investment property and reinvest proceeds into like-kind property, deferring capital gains taxes. Named after IRS Section 1031.

What are the 1031 exchange timeline requirements?

45 days to identify replacement properties (up to 3, or more under certain rules). 180 days to close on replacement property. Both deadlines are strict—no extensions.

How much do I need to reinvest in a 1031 exchange?

To defer all taxes, reinvest 100% of sale proceeds and buy property of equal or greater value. Any cash kept ('boot') is taxable.

Can I 1031 exchange into multiple properties?

Yes. You can identify up to 3 properties regardless of value, or more properties if their total value doesn't exceed 200% of the sold property's value.

Free 1031 Exchange Calculator | Tax Deferral Analysis

Property You're Selling (Relinquished)

Original Purchase Price ($)

Capital Improvements ($)

Additions, renovations (not repairs)

Selling Price ($)

Selling Costs ($)

Agent commission, closing costs

Depreciation Taken ($)

Total depreciation claimed

Mortgage Balance ($)

Tax Rates

Capital Gains Rate (%)

0%, 15%, or 20% federal

Depreciation Recapture Rate (%)

25% is standard federal rate

State Tax Rate (%)

Your state income tax rate

1031 Exchange Guide

What is a 1031 Exchange?

A 1031 exchange (like-kind exchange) allows you to defer capital gains and depreciation recapture taxes by exchanging one investment property for another of equal or greater value.

Key Requirements

Like-kind property: Real estate for real estate (broad definition)
Investment or business use: Not primary residence
45-day ID period: Must identify replacement properties
180-day close: Must close on replacement within 180 days
Qualified intermediary: Cannot touch the money yourself

Avoiding Boot (Taxable Portion)

Trade up in value: Replacement >= Relinquished
Trade up in debt: New mortgage >= Old mortgage
Reinvest all equity: Don't take cash out

Types of Boot

Cash boot: Any cash you receive is taxable
Mortgage boot: If new debt < old debt, the difference is taxable

Tax Rates (2024-2025)

Long-term capital gains: 0%, 15%, or 20% based on income
Depreciation recapture: 25% federal (unrecaptured Section 1250)
Net Investment Income Tax: Additional 3.8% if income > $250k (married)

Common Mistakes

Missing the 45-day identification deadline
Taking cash out (creates boot)
Not using a qualified intermediary
Buying property for less than you sold

1031 Exchange Calculator