How to read your 1031 estimate
A qualifying 1031 exchange carries your tax history forward into the next property instead of settling up now. The gain doesn't go away; it moves. Your replacement property's basis, and whatever you do with it later, still carry it.
Start with basis and realized gain
Your adjusted basis is what you paid, plus the improvements that qualify, minus the depreciation you've taken and any other tax adjustments. Sale proceeds after eligible selling expenses, minus that basis, give you realized gain. Paying off a loan changes how much cash you walk away with, but it doesn't cut taxable gain dollar for dollar.
Know the deadlines you're working to
Section 1031 generally covers business or investment real property. In a deferred exchange you generally have 45 days to identify the replacement property and 180 days to receive it, or your tax-return due date including extensions, whichever comes first. Set the structure up before you close, because taking the proceeds into your own hands can cost you the treatment. Walk through the IRS Form 8824 instructions with your tax adviser and qualified intermediary so you know where you stand.
Separate cash, debt, and taxable gain
Cash or other non-qualifying property you receive, along with net debt relief, can turn into gain you recognize now. New cash you bring in counts when you're replacing debt, so a smaller new mortgage isn't automatically a taxable amount. Related parties, expense classifications, multiple assets, and the shape of the deal each need their own look. IRS Publication 544 covers exchanges that involve money and liabilities.
What this estimate covers, and what it doesn't
You're looking at one simplified single-property scenario built from the basis, debt, cash, and tax rates you entered. It won't tell you whether your exchange qualifies, handle mixed assets or special recapture rules, keep your deadlines, or file your return. A partial exchange shows “Needs tax review” because splitting the tax in proportion to recognized gain can point you the wrong way. The depreciation-related rate is yours to set, not a claim that every gain is taxed at 25%. Net investment income tax and other items outside the model can move the number too.
Judge the replacement property's budget and financing on their own merits. A tax deadline never makes an unaffordable purchase work. The park exit guide shows how sale proceeds, refinancing, and an exchange fit into a bigger cash plan.
Line up your qualified intermediary early and the identification clock stops feeling like a sprint.