{"id":567,"date":"2026-07-06T00:31:40","date_gmt":"2026-07-06T04:31:40","guid":{"rendered":"https:\/\/arvcalc.com\/blog\/1031-exchange-boot\/"},"modified":"2026-07-11T00:28:27","modified_gmt":"2026-07-11T04:28:27","slug":"1031-exchange-boot","status":"publish","type":"post","link":"https:\/\/arvcalc.com\/blog\/1031-exchange-boot\/","title":{"rendered":"1031 Exchange Boot: How Much Tax Will You Owe? (2026)"},"content":{"rendered":"


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An investor sells a rental property for $500,000, rolls the proceeds into a $460,000 replacement property, and pockets $40,000 thinking the whole transaction is tax-free. Three months later, the IRS sends a bill for $12,800. That $40,000 they kept is called 1031 exchange boot<\/strong> \u2014 and it gets taxed just like a regular sale. Understanding exactly how boot works before you close can save you thousands.<\/p>\n

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What is 1031 exchange boot?<\/strong> Boot is any value you receive in a 1031 exchange that is not<\/em> like-kind property \u2014 cash taken out, net mortgage relief, or non-qualifying property. The IRS taxes boot in the year of the exchange. It does not get the tax-deferral benefit that the rest of the transaction receives. Boot is taxed as capital gain (15% or 20%), may carry depreciation recapture at 25%, and could trigger the 3.8% Net Investment Income Tax. Even if you reinvest every dollar of cash, a drop in mortgage balance on the replacement property creates mortgage boot<\/strong> \u2014 a trap many investors miss until after closing.<\/p>\n<\/div>\n

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