1031 Exchange Calculator: Tax Deferral Guide (2026) | ArvCalc<\/title><br \/>\n <meta name=\"description\" content=\"Calculate 1031 exchange tax deferral, boot, and timelines. Free calculator + worked examples with real numbers. Complete investor guide for 2026.\" \/><br \/>\n <meta name=\"robots\" content=\"index, follow\" \/>\n <link rel=\"canonical\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/\" \/>\n<style>\n \/* Base *\/\n *, *::before, *::after { box-sizing: border-box; margin: 0; padding: 0; }\n body { font-family: -apple-system, BlinkMacSystemFont, \"Segoe UI\", Roboto, Helvetica, Arial, sans-serif; font-size: 17px; line-height: 1.75; color: #1a1a1a; background: #fff; }\n a { color: #1d6fa4; text-decoration: none; }\n a:hover { text-decoration: underline; }<\/p>\n<p> \/* Layout *\/\n .article-wrap { max-width: 820px; margin: 0 auto; padding: 40px 20px 80px; }<\/p>\n<p> \/* Typography *\/\n h1 { font-size: 2.1rem; line-height: 1.25; font-weight: 800; margin-bottom: 18px; color: #111; }\n h2 { font-size: 1.55rem; font-weight: 700; margin: 52px 0 16px; color: #111; }\n h3 { font-size: 1.2rem; font-weight: 700; margin: 32px 0 12px; color: #222; }\n p { margin-bottom: 18px; }\n ul, 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style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#1031_Exchange_Calculator_How_to_Calculate_Tax_Deferral_2026\" >1031 Exchange Calculator: How to Calculate Tax Deferral (2026)<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#What_Is_a_1031_Exchange_%E2%80%94_and_What_Does_the_Calculator_Actually_Measure\" >What Is a 1031 Exchange \u2014 and What Does the Calculator Actually Measure?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Realized_Gain_vs_Recognized_Gain_The_Core_Calculation\" >Realized Gain vs. Recognized Gain: The Core Calculation<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Step_1_%E2%80%94_Calculate_Adjusted_Basis\" >Step 1 \u2014 Calculate Adjusted Basis<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Step_2_%E2%80%94_Calculate_Realized_Gain\" >Step 2 \u2014 Calculate Realized Gain<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#1031_Exchange_Calculator_Worked_Example_1_%E2%80%94_Full_Deferral\" >1031 Exchange Calculator: Worked Example 1 \u2014 Full Deferral<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Tax_Saved_in_Example_1\" >Tax Saved in Example 1<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#1031_Exchange_Calculator_Worked_Example_2_%E2%80%94_Partial_Deferral_with_Boot\" >1031 Exchange Calculator: Worked Example 2 \u2014 Partial Deferral with Boot<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Boot_Calculation\" >Boot Calculation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Recognized_Taxable_Gain\" >Recognized (Taxable) Gain<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Tax_Owed_on_Boot\" >Tax Owed on Boot<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Boot_Calculator_What_Counts_as_Boot_and_How_to_Avoid_It\" >Boot Calculator: What Counts as Boot and How to Avoid It<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Cash_Boot\" >Cash Boot<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Mortgage_Boot_Debt_Relief\" >Mortgage Boot (Debt Relief)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Boot_Avoidance_Checklist\" >Boot Avoidance Checklist<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#1031_Exchange_Timeline_The_Deadlines_That_Can_Kill_Your_Deal\" >1031 Exchange Timeline: The Deadlines That Can Kill Your Deal<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Example_Timeline_Sale_Closes_August_1_2026\" >Example Timeline: Sale Closes August 1, 2026<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#5_Common_1031_Exchange_Mistakes_That_Cost_Investors_Thousands\" >5 Common 1031 Exchange Mistakes That Cost Investors Thousands<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Missing_the_45-Day_Identification_Window\" >Missing the 45-Day Identification Window<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Accidentally_Triggering_Boot\" >Accidentally Triggering Boot<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Related-Party_Transactions\" >Related-Party Transactions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Converting_to_Personal_Use_Too_Quickly\" >Converting to Personal Use Too Quickly<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-23\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Forgetting_Depreciation_Recapture_on_the_Carry-Forward_Basis\" >Forgetting Depreciation Recapture on the Carry-Forward Basis<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-24\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Capital_Gains_Tax_Rates_in_2026_Why_Deferral_Matters_More_Than_Ever\" >Capital Gains Tax Rates in 2026: Why Deferral Matters More Than Ever<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-25\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#What_Property_Qualifies_for_a_1031_Exchange\" >What Property Qualifies for a 1031 Exchange?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-26\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#How_to_Use_the_ArvCalc_1031_Exchange_Calculator\" >How to Use the ArvCalc 1031 Exchange Calculator<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-27\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Frequently_Asked_Questions\" >Frequently Asked Questions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-28\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Related_Calculators_and_Guides\" >Related Calculators and Guides<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-29\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Further_Reading\" >Further Reading<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-30\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Sources_and_Further_Reading\" >Sources and Further Reading<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"1031_Exchange_Calculator_How_to_Calculate_Tax_Deferral_2026\"><\/span>1031 Exchange Calculator: How to Calculate Tax Deferral (2026)<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<p class=\"post-meta\">\n <span>Updated July 2026<\/span><br \/>\n <span>12 min read<\/span><br \/>\n <span>By ArvCalc Editorial<\/span>\n <\/p>\n<p> <\/p>\n<p>Picture this: you bought a rental duplex in Phoenix eight years ago for $300,000. Today you have a buyer offering $450,000. After closing costs, your net gain is north of $140,000 \u2014 and the IRS wants a chunk of it. Between <strong>federal capital gains tax at 15\u201320%<\/strong>, <strong>depreciation recapture at 25%<\/strong>, and state tax that can add another 3\u201313%, you could hand over $40,000\u2013$60,000 before you even touch the next deal.<\/p>\n<p>A <strong>1031 exchange calculator<\/strong> lets you model exactly how much of that bill disappears when you reinvest the proceeds into a like-kind replacement property instead of pocketing the cash. This guide walks through the rules, the math, two detailed worked examples, every deadline you need to hit, and the mistakes that blow up otherwise solid deals.<\/p>\n<div class=\"callout\">\n<div class=\"callout-title\">Quick Start<\/div>\n<p>Skip the theory? Plug your numbers into our free <a href=\"\/1031-exchange-calculator\">1031 exchange calculator<\/a> and get your tax deferral estimate in under two minutes. Then come back here to understand what the numbers mean.<\/p>\n<\/p><\/div>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_Is_a_1031_Exchange_%E2%80%94_and_What_Does_the_Calculator_Actually_Measure\"><\/span>What Is a 1031 Exchange \u2014 and What Does the Calculator Actually Measure?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Section 1031 of the Internal Revenue Code lets real estate investors defer capital gains taxes when they sell a property and reinvest the proceeds into a “like-kind” replacement. The tax does not go away permanently \u2014 it rolls forward into the basis of the new property \u2014 but deferral keeps your full equity working in the next deal rather than shrinking by 20\u201340% on the way out.<\/p>\n<p>A <strong>1031 exchange calculator<\/strong> measures three things simultaneously:<\/p>\n<ul>\n<li><strong>Realized gain<\/strong> \u2014 the difference between your net sale price and your adjusted basis (original cost minus accumulated depreciation)<\/li>\n<li><strong>Recognized gain<\/strong> \u2014 the portion of that gain you must pay tax on right now, usually because you received cash out (called “boot”)<\/li>\n<li><strong>Deferred gain<\/strong> \u2014 the portion successfully rolled over, which becomes the carry-forward basis of the replacement property<\/li>\n<\/ul>\n<p>For a complete primer on the mechanics, see our full <a href=\"\/blog\/1031-exchange-real-estate-guide\/\">1031 exchange real estate guide<\/a>. For the strict IRS rules that govern what qualifies, the primary authority is <a href=\"https:\/\/www.irs.gov\/publications\/p544\" target=\"_blank\" rel=\"noopener noreferrer\">IRS Publication 544: Sales and Other Dispositions of Assets<\/a> and the <a href=\"https:\/\/www.irs.gov\/newsroom\/like-kind-exchanges-real-estate-tax-tips\" target=\"_blank\" rel=\"noopener noreferrer\">IRS like-kind exchange guidance<\/a>.<\/p>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"Realized_Gain_vs_Recognized_Gain_The_Core_Calculation\"><\/span>Realized Gain vs. Recognized Gain: The Core Calculation<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Before you can use a 1031 exchange calculator, you need two foundation numbers.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Step_1_%E2%80%94_Calculate_Adjusted_Basis\"><\/span>Step 1 \u2014 Calculate Adjusted Basis<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Your adjusted basis starts with what you paid, then shifts over time:<\/p>\n<div class=\"table-wrap\">\n<table>\n<thead>\n<tr>\n<th>Item<\/th>\n<th class=\"num\">Amount<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Original purchase price<\/td>\n<td class=\"num\">$300,000<\/td>\n<\/tr>\n<tr>\n<td>+ Capital improvements<\/td>\n<td class=\"num\">$20,000<\/td>\n<\/tr>\n<tr>\n<td>\u2212 Accumulated depreciation (8 yrs \u00d7 ~$9,090\/yr)<\/td>\n<td class=\"num\">\u2212$72,720<\/td>\n<\/tr>\n<tr>\n<td><strong>= Adjusted basis<\/strong><\/td>\n<td class=\"num\"><strong>$247,280<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<p>Use our <a href=\"\/depreciation-calculator\">depreciation calculator<\/a> to get your annual deduction figure if you are not sure how much basis you have already used up. This matters because the IRS taxes depreciation recapture at a flat <strong>25%<\/strong>, separate from the long-term capital gains rate.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Step_2_%E2%80%94_Calculate_Realized_Gain\"><\/span>Step 2 \u2014 Calculate Realized Gain<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"table-wrap\">\n<table>\n<thead>\n<tr>\n<th>Item<\/th>\n<th class=\"num\">Amount<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Gross sale price<\/td>\n<td class=\"num\">$450,000<\/td>\n<\/tr>\n<tr>\n<td>\u2212 Selling costs (commission, closing fees ~5%)<\/td>\n<td class=\"num\">\u2212$22,500<\/td>\n<\/tr>\n<tr>\n<td>= Amount realized<\/td>\n<td class=\"num\">$427,500<\/td>\n<\/tr>\n<tr>\n<td>\u2212 Adjusted basis<\/td>\n<td class=\"num\">\u2212$247,280<\/td>\n<\/tr>\n<tr>\n<td><strong>= Realized gain<\/strong><\/td>\n<td class=\"num\"><strong>$180,220<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<p>That $180,220 breaks into two tax “buckets”: $72,720 of depreciation recapture (taxed at 25%) and $107,500 of long-term capital gain (taxed at 15% or 20% federally, depending on your income).<\/p>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"1031_Exchange_Calculator_Worked_Example_1_%E2%80%94_Full_Deferral\"><\/span>1031 Exchange Calculator: Worked Example 1 \u2014 Full Deferral<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<div class=\"callout green\">\n<div class=\"callout-title\">Scenario A \u2014 Sell $450K, Buy $500K, Zero Boot<\/div>\n<p><strong>Reinhvest everything. Defer everything.<\/strong><\/p>\n<\/p><\/div>\n<p>Maria sells her Phoenix duplex for $450,000 (net proceeds after costs: $427,500) and uses a qualified intermediary to buy a replacement property in Scottsdale for $500,000. She does not pocket any cash.<\/p>\n<div class=\"table-wrap\">\n<table>\n<thead>\n<tr>\n<th>Line Item<\/th>\n<th class=\"num\">Amount<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Sale price<\/td>\n<td class=\"num\">$450,000<\/td>\n<\/tr>\n<tr>\n<td>Selling costs<\/td>\n<td class=\"num\">\u2212$22,500<\/td>\n<\/tr>\n<tr>\n<td>Amount realized<\/td>\n<td class=\"num\">$427,500<\/td>\n<\/tr>\n<tr>\n<td>Adjusted basis of relinquished property<\/td>\n<td class=\"num\">$247,280<\/td>\n<\/tr>\n<tr>\n<td>Realized gain<\/td>\n<td class=\"num\">$180,220<\/td>\n<\/tr>\n<tr>\n<td>Boot received<\/td>\n<td class=\"num\">$0<\/td>\n<\/tr>\n<tr>\n<td><strong>Recognized (taxable) gain<\/strong><\/td>\n<td class=\"num\"><strong>$0<\/strong><\/td>\n<\/tr>\n<tr>\n<td><strong>Deferred gain<\/strong><\/td>\n<td class=\"num\"><strong>$180,220<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<h3><span class=\"ez-toc-section\" id=\"Tax_Saved_in_Example_1\"><\/span>Tax Saved in Example 1<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"table-wrap\">\n<table>\n<thead>\n<tr>\n<th>Tax Component<\/th>\n<th class=\"num\">Gain Subject to Tax<\/th>\n<th class=\"num\">Rate<\/th>\n<th class=\"num\">Tax Without Exchange<\/th>\n<th class=\"num\">Tax With Exchange<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Depreciation recapture<\/td>\n<td class=\"num\">$72,720<\/td>\n<td class=\"num\">25%<\/td>\n<td class=\"num\">$18,180<\/td>\n<td class=\"num\">$0<\/td>\n<\/tr>\n<tr>\n<td>Federal capital gains (15%)<\/td>\n<td class=\"num\">$107,500<\/td>\n<td class=\"num\">15%<\/td>\n<td class=\"num\">$16,125<\/td>\n<td class=\"num\">$0<\/td>\n<\/tr>\n<tr>\n<td>State tax (AZ ~4.5% approx.)<\/td>\n<td class=\"num\">$180,220<\/td>\n<td class=\"num\">4.5%<\/td>\n<td class=\"num\">$8,110<\/td>\n<td class=\"num\">$0<\/td>\n<\/tr>\n<tr>\n<td><strong>Total<\/strong><\/td>\n<td class=\"num\"><\/td>\n<td class=\"num\"><\/td>\n<td class=\"num\"><strong>$42,415<\/strong><\/td>\n<td class=\"num\"><strong>$0<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<p><strong>Maria defers $42,415 in tax by doing the exchange.<\/strong> That capital stays fully deployed into the $500,000 replacement property, compounding rather than evaporating.<\/p>\n<p>The replacement property’s starting basis is $500,000 minus the $180,220 deferred gain, leaving Maria with a <strong>carryover basis of $319,780<\/strong>. If she sells later without another exchange, that deferred gain surfaces at that point \u2014 but by then, she may have stepped up the property’s value considerably.<\/p>\n<div class=\"cta-block\">\n<p>Want to run your own numbers? Our free <a href=\"\/1031-exchange-calculator\">1031 exchange calculator<\/a> handles depreciation recapture, boot, and state tax in one place.<\/p>\n<p> <a href=\"\/1031-exchange-calculator\" class=\"cta-btn\">Open the Calculator<\/a>\n <\/div>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"1031_Exchange_Calculator_Worked_Example_2_%E2%80%94_Partial_Deferral_with_Boot\"><\/span>1031 Exchange Calculator: Worked Example 2 \u2014 Partial Deferral with Boot<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<div class=\"callout amber\">\n<div class=\"callout-title\">Scenario B \u2014 Sell $450K, Buy $400K, $50K Boot<\/div>\n<p><strong>Downgrade the replacement. Pay tax on the difference.<\/strong><\/p>\n<\/p><\/div>\n<p>James sells the same duplex but buys a smaller replacement property for $400,000, keeping the $27,500 difference in cash. That $27,500 in cash plus any mortgage relief he received is “boot” \u2014 and it triggers a partial tax bill immediately.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Boot_Calculation\"><\/span>Boot Calculation<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"table-wrap\">\n<table>\n<thead>\n<tr>\n<th>Item<\/th>\n<th class=\"num\">Amount<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Net proceeds (after selling costs)<\/td>\n<td class=\"num\">$427,500<\/td>\n<\/tr>\n<tr>\n<td>Replacement property purchase price<\/td>\n<td class=\"num\">$400,000<\/td>\n<\/tr>\n<tr>\n<td><strong>Cash boot received<\/strong><\/td>\n<td class=\"num\"><strong>$27,500<\/strong><\/td>\n<\/tr>\n<tr>\n<td>Old mortgage paid off<\/td>\n<td class=\"num\">$120,000<\/td>\n<\/tr>\n<tr>\n<td>New mortgage assumed<\/td>\n<td class=\"num\">$95,000<\/td>\n<\/tr>\n<tr>\n<td>Mortgage relief (net boot)<\/td>\n<td class=\"num\">$25,000<\/td>\n<\/tr>\n<tr>\n<td><strong>Total boot<\/strong><\/td>\n<td class=\"num\"><strong>$52,500<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<p>Mortgage relief counts as boot because James is walking away from less debt than he carried before. For a full breakdown of every item that triggers boot, see our dedicated <a href=\"\/blog\/1031-exchange-boot\/\">1031 exchange boot guide<\/a>.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Recognized_Taxable_Gain\"><\/span>Recognized (Taxable) Gain<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Recognized gain equals the <em>lesser<\/em> of (a) total boot received or (b) total realized gain.<\/p>\n<div class=\"table-wrap\">\n<table>\n<thead>\n<tr>\n<th>Item<\/th>\n<th class=\"num\">Amount<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Realized gain<\/td>\n<td class=\"num\">$180,220<\/td>\n<\/tr>\n<tr>\n<td>Total boot received<\/td>\n<td class=\"num\">$52,500<\/td>\n<\/tr>\n<tr>\n<td><strong>Recognized gain (lesser of the two)<\/strong><\/td>\n<td class=\"num\"><strong>$52,500<\/strong><\/td>\n<\/tr>\n<tr>\n<td>Deferred gain ($180,220 \u2212 $52,500)<\/td>\n<td class=\"num\">$127,720<\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<h3><span class=\"ez-toc-section\" id=\"Tax_Owed_on_Boot\"><\/span>Tax Owed on Boot<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"table-wrap\">\n<table>\n<thead>\n<tr>\n<th>Tax Component<\/th>\n<th class=\"num\">Taxable Gain<\/th>\n<th class=\"num\">Rate<\/th>\n<th class=\"num\">Tax Owed<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Depreciation recapture (first priority)<\/td>\n<td class=\"num\">$52,500<\/td>\n<td class=\"num\">25%<\/td>\n<td class=\"num\">$13,125<\/td>\n<\/tr>\n<tr>\n<td>Federal long-term capital gains<\/td>\n<td class=\"num\">$0<\/td>\n<td class=\"num\">15%<\/td>\n<td class=\"num\">$0<\/td>\n<\/tr>\n<tr>\n<td>State tax (AZ ~4.5%)<\/td>\n<td class=\"num\">$52,500<\/td>\n<td class=\"num\">4.5%<\/td>\n<td class=\"num\">$2,363<\/td>\n<\/tr>\n<tr>\n<td><strong>Total tax owed now<\/strong><\/td>\n<td class=\"num\"><\/td>\n<td class=\"num\"><\/td>\n<td class=\"num\"><strong>$15,488<\/strong><\/td>\n<\/tr>\n<tr>\n<td><strong>Deferred (not owed now)<\/strong><\/td>\n<td class=\"num\">$127,720<\/td>\n<td class=\"num\"><\/td>\n<td class=\"num\"><strong>~$27,000 est.<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<p>Note that the IRS applies boot first to depreciation recapture, then to capital gains. Because the $52,500 boot is less than the $72,720 depreciation recapture, James’s entire taxable gain falls into the 25% recapture bucket \u2014 he owes nothing at the capital gains rate yet.<\/p>\n<div class=\"callout red\">\n<div class=\"callout-title\">Watch Out<\/div>\n<p>Taking even a small amount of cash boot can be surprisingly expensive. In Example 2, pocketing $27,500 in cash resulted in $13,125 in federal tax alone \u2014 nearly a 48% effective rate on that cash \u2014 because it hit depreciation recapture first.<\/p>\n<\/p><\/div>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"Boot_Calculator_What_Counts_as_Boot_and_How_to_Avoid_It\"><\/span>Boot Calculator: What Counts as Boot and How to Avoid It<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Boot is any value you receive that is not “like-kind” real property. It collapses your deferral dollar-for-dollar, up to the limit of your realized gain. There are two types:<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Cash_Boot\"><\/span>Cash Boot<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Cash or near-cash items you receive at closing<\/li>\n<li>Closing costs paid from exchange proceeds that are not “exchange expenses” (e.g., property inspections, prorated rent, security deposits)<\/li>\n<li>Personal property received (appliances, vehicles, equipment transferred separately)<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Mortgage_Boot_Debt_Relief\"><\/span>Mortgage Boot (Debt Relief)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>If the old mortgage was $200,000 and the new mortgage is $150,000, the $50,000 difference is mortgage boot<\/li>\n<li>You can offset mortgage boot with cash \u2014 pay an extra $50,000 into the replacement to neutralize it<\/li>\n<li>You cannot offset cash boot with mortgage boot \u2014 they run in one direction only<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Boot_Avoidance_Checklist\"><\/span>Boot Avoidance Checklist<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Replacement property purchase price equal to or greater than net sale price<\/li>\n<li>New debt equal to or greater than old debt (or make up the difference in cash)<\/li>\n<li>All proceeds flow through the qualified intermediary \u2014 never touch them yourself<\/li>\n<li>Pay allowable exchange expenses from exchange funds only<\/li>\n<li>Avoid receiving personal property in the deal (negotiate separate transfer outside the exchange if needed)<\/li>\n<\/ul>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"1031_Exchange_Timeline_The_Deadlines_That_Can_Kill_Your_Deal\"><\/span>1031 Exchange Timeline: The Deadlines That Can Kill Your Deal<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The IRS gives you a strict two-step deadline. Miss either one and the exchange fails \u2014 full stop. See our dedicated <a href=\"\/blog\/1031-exchange-timeline-deadlines-guide\/\">1031 exchange timeline and deadlines guide<\/a> for how to build a compliant calendar.<\/p>\n<div class=\"timeline\">\n<div class=\"timeline-item\">\n<div class=\"timeline-label\">Day 0 \u2014 Closing on Relinquished Property<\/div>\n<p>The clock starts the moment you close the sale. Funds must go directly to a <strong>qualified intermediary (QI)<\/strong> \u2014 never to you or your attorney’s trust account. Receiving even $1 directly breaks the exchange.<\/p>\n<\/p><\/div>\n<div class=\"timeline-item\">\n<div class=\"timeline-label\">Day 45 \u2014 Identification Deadline<\/div>\n<p>You must identify potential replacement properties in writing, signed and delivered to the QI or seller by <strong>midnight of Day 45<\/strong>. You have three options: identify up to 3 properties (3-property rule), any number worth up to 200% of relinquished value (200% rule), or any number if you close on 95% of identified value (95% rule). Most investors use the 3-property rule \u2014 it is the safest.<\/p>\n<\/p><\/div>\n<div class=\"timeline-item\">\n<div class=\"timeline-label\">Day 180 \u2014 Closing Deadline<\/div>\n<p>You must close on a replacement from your identified list by <strong>Day 180<\/strong> (or the due date of your tax return including extensions, whichever is earlier). There are almost no exceptions. Extensions are granted only for presidentially declared disasters.<\/p>\n<\/p><\/div>\n<\/p><\/div>\n<h3><span class=\"ez-toc-section\" id=\"Example_Timeline_Sale_Closes_August_1_2026\"><\/span>Example Timeline: Sale Closes August 1, 2026<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"table-wrap\">\n<table>\n<thead>\n<tr>\n<th>Milestone<\/th>\n<th>Date<\/th>\n<th>Days from Close<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Relinquished property closes<\/td>\n<td>August 1, 2026<\/td>\n<td>Day 0<\/td>\n<\/tr>\n<tr>\n<td>Identification deadline<\/td>\n<td>September 15, 2026<\/td>\n<td>Day 45<\/td>\n<\/tr>\n<tr>\n<td>Exchange closes (latest)<\/td>\n<td>January 28, 2027<\/td>\n<td>Day 180<\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<div class=\"callout amber\">\n<div class=\"callout-title\">Tax Return Overlap Warning<\/div>\n<p>If your tax return is due before Day 180 (e.g., April 15 for an exchange that started in late October), the exchange must close by the return due date unless you file an extension. Always file the extension proactively \u2014 it costs nothing and protects the full 180 days.<\/p>\n<\/p><\/div>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"5_Common_1031_Exchange_Mistakes_That_Cost_Investors_Thousands\"><\/span>5 Common 1031 Exchange Mistakes That Cost Investors Thousands<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul class=\"mistake-list\">\n<li class=\"mistake-item\">\n<div class=\"mistake-num\">1<\/div>\n<div class=\"mistake-body\">\n<h3><span class=\"ez-toc-section\" id=\"Missing_the_45-Day_Identification_Window\"><\/span>Missing the 45-Day Identification Window<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>This is the most common failure point. Investors close the sale, then spend weeks searching for properties before realizing the 45-day clock started the day they closed \u2014 not the day they started looking. Prepare your short-list of replacement candidates before you list the relinquished property. Forty-five days sounds like a lot until escrow delays, inspection issues, and holiday weekends eat into it.<\/p>\n<\/p><\/div>\n<\/li>\n<li class=\"mistake-item\">\n<div class=\"mistake-num\">2<\/div>\n<div class=\"mistake-body\">\n<h3><span class=\"ez-toc-section\" id=\"Accidentally_Triggering_Boot\"><\/span>Accidentally Triggering Boot<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Paying for repairs, inspections, or prorated HOA dues from exchange funds creates boot if those costs are not “exchange expenses.” Similarly, buying a replacement for less than the relinquished net sale price creates cash boot equal to the difference. Run the boot calculation before you go under contract, not after.<\/p>\n<\/p><\/div>\n<\/li>\n<li class=\"mistake-item\">\n<div class=\"mistake-num\">3<\/div>\n<div class=\"mistake-body\">\n<h3><span class=\"ez-toc-section\" id=\"Related-Party_Transactions\"><\/span>Related-Party Transactions<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Buying a replacement property from a family member (spouse, parent, sibling, or entity you control) requires a 2-year holding period for both parties after the exchange. If either party sells within 2 years, the exchange is disallowed retroactively. The IRS watches related-party exchanges closely \u2014 document your arm’s-length rationale carefully if the situation arises.<\/p>\n<\/p><\/div>\n<\/li>\n<li class=\"mistake-item\">\n<div class=\"mistake-num\">4<\/div>\n<div class=\"mistake-body\">\n<h3><span class=\"ez-toc-section\" id=\"Converting_to_Personal_Use_Too_Quickly\"><\/span>Converting to Personal Use Too Quickly<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>A replacement property must be held for productive use in a trade or business or for investment. Moving into it or converting it to a vacation home too quickly can disqualify the exchange. The IRS Rev. Proc. 2008-16 safe harbor requires 24 months of qualified use before any personal-use conversion, with personal use capped at 14 days or 10% of rental days per year.<\/p>\n<\/p><\/div>\n<\/li>\n<li class=\"mistake-item\">\n<div class=\"mistake-num\">5<\/div>\n<div class=\"mistake-body\">\n<h3><span class=\"ez-toc-section\" id=\"Forgetting_Depreciation_Recapture_on_the_Carry-Forward_Basis\"><\/span>Forgetting Depreciation Recapture on the Carry-Forward Basis<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>When you eventually sell the replacement property without another exchange, the IRS collects both the current gain and the previously deferred depreciation recapture. Investors who plan to hold forever sometimes forget this liability sitting in their basis. Use our <a href=\"\/depreciation-calculator\">depreciation calculator<\/a> to track cumulative recapture exposure across properties so you are never surprised.<\/p>\n<\/p><\/div>\n<\/li>\n<\/ul>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"Capital_Gains_Tax_Rates_in_2026_Why_Deferral_Matters_More_Than_Ever\"><\/span>Capital Gains Tax Rates in 2026: Why Deferral Matters More Than Ever<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Understanding the tax rates your calculator is working against puts the savings in context. For 2026, federal long-term capital gains rates are:<\/p>\n<div class=\"table-wrap\">\n<table>\n<thead>\n<tr>\n<th>Filing Status<\/th>\n<th>Income (2026 est.)<\/th>\n<th class=\"num\">Rate<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Single<\/td>\n<td>Up to ~$47,000<\/td>\n<td class=\"num\">0%<\/td>\n<\/tr>\n<tr>\n<td>Single<\/td>\n<td>~$47,001\u2013$518,000<\/td>\n<td class=\"num\">15%<\/td>\n<\/tr>\n<tr>\n<td>Single<\/td>\n<td>Above ~$518,000<\/td>\n<td class=\"num\">20%<\/td>\n<\/tr>\n<tr>\n<td>MFJ<\/td>\n<td>Up to ~$94,000<\/td>\n<td class=\"num\">0%<\/td>\n<\/tr>\n<tr>\n<td>MFJ<\/td>\n<td>~$94,001\u2013$583,000<\/td>\n<td class=\"num\">15%<\/td>\n<\/tr>\n<tr>\n<td>MFJ<\/td>\n<td>Above ~$583,000<\/td>\n<td class=\"num\">20%<\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<p>On top of federal rates, high earners may owe the 3.8% Net Investment Income Tax (NIIT) on gains, and <strong>state tax varies widely<\/strong> \u2014 from 0% in Texas and Florida to over 13% in California. Our <a href=\"\/capital-gains-tax-calculator\">capital gains tax calculator<\/a> lets you model the combined federal + state + NIIT liability before you decide whether to exchange or simply sell. See also our <a href=\"\/blog\/capital-gains-tax-calculator-guide\/\">capital gains tax calculator guide<\/a> for a walkthrough of all the inputs.<\/p>\n<p>Depreciation recapture runs at a separate flat <strong>25% federal rate<\/strong> regardless of your income bracket, plus applicable state tax. This is often the largest single tax item for long-term holders, because rental properties accumulate depreciation steadily \u2014 approximately 3.636% of the building value per year over 27.5 years. For a property with a $250,000 building value, that is $9,090 per year compounding into recapture exposure.<\/p>\n<p>If you are exploring ways to reduce your overall tax exposure beyond the 1031 exchange, our article on <a href=\"\/blog\/how-to-avoid-capital-gains-tax-on-real-estate\/\">how to avoid capital gains tax on real estate<\/a> covers opportunity zones, installment sales, charitable remainder trusts, and stepped-up basis strategies.<\/p>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_Property_Qualifies_for_a_1031_Exchange\"><\/span>What Property Qualifies for a 1031 Exchange?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The IRS definition of “like-kind” for real property is broad \u2014 almost any real estate used for investment or business qualifies:<\/p>\n<ul>\n<li>Residential rentals (single-family, duplexes, apartments)<\/li>\n<li>Commercial properties (office, retail, industrial, storage)<\/li>\n<li>Raw land held for investment<\/li>\n<li>Triple-net leased properties<\/li>\n<li>Tenant-in-common (TIC) interests<\/li>\n<li>Delaware Statutory Trust (DST) interests<\/li>\n<\/ul>\n<p>What does <em>not<\/em> qualify:<\/p>\n<ul>\n<li>Primary residence or personal vacation home (unless you meet mixed-use carve-out rules)<\/li>\n<li>Property held primarily for sale (fix-and-flip inventory, dealer property)<\/li>\n<li>Stocks, bonds, partnership interests, or other securities<\/li>\n<li>Foreign real estate exchanged for U.S. real estate (must be like-kind in the same country)<\/li>\n<\/ul>\n<p>According to the <a href=\"https:\/\/www.nar.realtor\/research-and-statistics\" target=\"_blank\" rel=\"noopener noreferrer\">National Association of Realtors<\/a>, 1031 exchanges account for a meaningful share of commercial real estate transactions annually \u2014 investors cite tax deferral as the primary reason they reinvest rather than cash out. The <a href=\"https:\/\/taxfoundation.org\/research\/all\/federal\/like-kind-exchanges-1031\/\" target=\"_blank\" rel=\"noopener noreferrer\">Tax Foundation’s analysis of like-kind exchange rules<\/a> estimates that eliminating Section 1031 would significantly reduce real estate investment and property maintenance nationwide.<\/p>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_to_Use_the_ArvCalc_1031_Exchange_Calculator\"><\/span>How to Use the ArvCalc 1031 Exchange Calculator<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Our <a href=\"\/1031-exchange-calculator\">1031 exchange calculator<\/a> walks through four input sections:<\/p>\n<ol>\n<li><strong>Relinquished property details<\/strong> \u2014 sale price, selling costs, original purchase price, capital improvements, accumulated depreciation. If you need the depreciation figure, use the <a href=\"\/depreciation-calculator\">depreciation calculator<\/a> first.<\/li>\n<li><strong>Replacement property details<\/strong> \u2014 purchase price, buying costs, new debt. This lets the calculator determine boot automatically.<\/li>\n<li><strong>Tax profile<\/strong> \u2014 filing status, total household income, state of sale. These inputs determine which capital gains rate applies.<\/li>\n<li><strong>Results<\/strong> \u2014 the calculator shows realized gain, recognized gain, deferred gain, depreciation recapture amount, total tax without exchange, tax with exchange (if any boot), and dollars saved.<\/li>\n<\/ol>\n<p>Run the calculator at the beginning of your deal analysis, not at the end. Knowing the tax exposure upfront shapes how aggressively you need to replace \u2014 sometimes a partial exchange with modest boot is actually smarter than overpaying for a replacement just to avoid a small recapture bill.<\/p>\n<p>For a broader picture of your investment returns, pair the 1031 analysis with our <a href=\"\/rental-property-calculator\">rental property calculator<\/a> to project cash-on-cash return, cap rate, and annual cash flow on the replacement. The <a href=\"\/blog\/real-estate-roi-calculator-guide\/\">real estate ROI calculator guide<\/a> explains how to read those outputs in the context of an exchange \u2014 especially when your carry-forward basis changes future depreciation on the replacement.<\/p>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"Frequently_Asked_Questions\"><\/span>Frequently Asked Questions<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul class=\"faq-list\" id=\"faq\">\n<li class=\"faq-item open\">\n <button class=\"faq-question\" aria-expanded=\"true\" onclick=\"toggleFaq(this)\"><br \/>\n Can I do a 1031 exchange on my primary residence?<br \/>\n <span class=\"faq-icon\">+<\/span><br \/>\n <\/button><\/p>\n<div class=\"faq-answer\">\n<p>No \u2014 Section 1031 applies only to property held for investment or productive use in a trade or business. Your primary home qualifies for a different exclusion: up to $250,000 (single) or $500,000 (married filing jointly) of gain is excluded under IRC Section 121 if you lived there 2 of the past 5 years. If you have a rental portion of a mixed-use property, a partial exchange may be possible for the rental fraction \u2014 consult a tax advisor for split-use situations.<\/p>\n<\/p><\/div>\n<\/li>\n<li class=\"faq-item\">\n <button class=\"faq-question\" aria-expanded=\"false\" onclick=\"toggleFaq(this)\"><br \/>\n How many replacement properties can I identify?<br \/>\n <span class=\"faq-icon\">+<\/span><br \/>\n <\/button><\/p>\n<div class=\"faq-answer\">\n<p>Under the standard 3-property rule, you can identify up to three replacement properties regardless of their combined value. Under the 200% rule, you can identify any number of properties as long as their combined fair market value does not exceed 200% of the relinquished property’s value. Under the 95% rule, you can identify any number of properties of any value, but you must close on at least 95% of the total identified value \u2014 a very high bar that trips up most investors who try it.<\/p>\n<\/p><\/div>\n<\/li>\n<li class=\"faq-item\">\n <button class=\"faq-question\" aria-expanded=\"false\" onclick=\"toggleFaq(this)\"><br \/>\n What happens to the deferred gain if I die before selling the replacement?<br \/>\n <span class=\"faq-icon\">+<\/span><br \/>\n <\/button><\/p>\n<div class=\"faq-answer\">\n<p>This is one of the most powerful estate planning aspects of the 1031 exchange. When the property passes to your heirs at death, it receives a stepped-up basis equal to fair market value at the date of death. The accumulated deferred gain \u2014 including all the depreciation recapture \u2014 permanently disappears. Heirs inherit the property with a clean slate and owe no tax on the gain you built up. This makes long-term hold-and-exchange strategies particularly effective for estate planning.<\/p>\n<\/p><\/div>\n<\/li>\n<li class=\"faq-item\">\n <button class=\"faq-question\" aria-expanded=\"false\" onclick=\"toggleFaq(this)\"><br \/>\n Do I need a qualified intermediary (QI)?<br \/>\n <span class=\"faq-icon\">+<\/span><br \/>\n <\/button><\/p>\n<div class=\"faq-answer\">\n<p>Yes, in virtually all cases. A qualified intermediary holds the exchange proceeds between the sale and the replacement purchase, preventing you from having “actual or constructive receipt” of the funds. If you receive the money \u2014 even briefly \u2014 the exchange fails and the full gain becomes taxable in the year of sale. Your attorney, accountant, or real estate agent generally cannot serve as QI due to the “disqualified person” rules. Always use an independent, established QI with errors-and-omissions coverage and segregated client accounts.<\/p>\n<\/p><\/div>\n<\/li>\n<li class=\"faq-item\">\n <button class=\"faq-question\" aria-expanded=\"false\" onclick=\"toggleFaq(this)\"><br \/>\n Can I exchange into multiple replacement properties?<br \/>\n <span class=\"faq-icon\">+<\/span><br \/>\n <\/button><\/p>\n<div class=\"faq-answer\">\n<p>Yes. You can buy more than one replacement property as long as each property was on your identified list and you close on all of them within the 180-day window. This is common when investors use exchange proceeds to diversify from one large property into several smaller ones. Each replacement property gets its own portion of the carry-forward basis, allocated in proportion to the price paid for each.<\/p>\n<\/p><\/div>\n<\/li>\n<li class=\"faq-item\">\n <button class=\"faq-question\" aria-expanded=\"false\" onclick=\"toggleFaq(this)\"><br \/>\n Is boot always bad? Should I always try to avoid it?<br \/>\n <span class=\"faq-icon\">+<\/span><br \/>\n <\/button><\/p>\n<div class=\"faq-answer\">\n<p>Not necessarily. Sometimes taking boot makes financial sense \u2014 if the only available replacement properties are overpriced, overpaying by $80,000 to avoid a $20,000 tax bill is a poor trade. The question is whether the after-tax cash from boot is more valuable than the equity locked into an inferior replacement. Run both scenarios through the calculator: full exchange vs. partial exchange with boot. The answer depends on your income tax rate, the replacement’s expected returns, and your alternative investment options.<\/p>\n<\/p><\/div>\n<\/li>\n<li class=\"faq-item\">\n <button class=\"faq-question\" aria-expanded=\"false\" onclick=\"toggleFaq(this)\"><br \/>\n What is a reverse 1031 exchange and can I calculate it the same way?<br \/>\n <span class=\"faq-icon\">+<\/span><br \/>\n <\/button><\/p>\n<div class=\"faq-answer\">\n<p>A reverse exchange lets you acquire the replacement property first, before selling the relinquished property. An Exchange Accommodation Titleholder (EAT) takes title to the parked property while you line up the sale. The same 45-day identification and 180-day closing rules apply, running from the date the EAT takes title. The tax math is identical \u2014 realized gain, boot, deferred gain all calculate the same way. The difference is complexity and cost: reverse exchanges typically cost $10,000\u2013$20,000 more in fees than forward exchanges.<\/p>\n<\/p><\/div>\n<\/li>\n<\/ul>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"Related_Calculators_and_Guides\"><\/span>Related Calculators and Guides<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<div class=\"related-grid\">\n <a href=\"\/1031-exchange-calculator\" class=\"related-card\"><\/p>\n<div class=\"related-card-title\">1031 Exchange Calculator<\/div>\n<p>Compute tax deferral, boot, and deferred gain in one step.<\/p>\n<p> <\/a><br \/>\n <a href=\"\/capital-gains-tax-calculator\" class=\"related-card\"><\/p>\n<div class=\"related-card-title\">Capital Gains Tax Calculator<\/div>\n<p>Federal + state + NIIT estimate for any real estate sale.<\/p>\n<p> <\/a><br \/>\n <a href=\"\/rental-property-calculator\" class=\"related-card\"><\/p>\n<div class=\"related-card-title\">Rental Property Calculator<\/div>\n<p>Cap rate, cash-on-cash return, and NOI for any rental.<\/p>\n<p> <\/a><br \/>\n <a href=\"\/depreciation-calculator\" class=\"related-card\"><\/p>\n<div class=\"related-card-title\">Depreciation Calculator<\/div>\n<p>Annual deduction and accumulated recapture exposure by year.<\/p>\n<p> <\/a>\n <\/div>\n<p><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Further_Reading\"><\/span>Further Reading<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li><a href=\"\/blog\/1031-exchange-real-estate-guide\/\">Complete 1031 Exchange Guide for Real Estate Investors<\/a><\/li>\n<li><a href=\"\/blog\/1031-exchange-timeline-deadlines-guide\/\">1031 Exchange Timeline and Deadlines \u2014 How to Build a Compliant Calendar<\/a><\/li>\n<li><a href=\"\/blog\/1031-exchange-boot\/\">1031 Exchange Boot: What It Is and How to Avoid It<\/a><\/li>\n<li><a href=\"\/blog\/capital-gains-tax-calculator-guide\/\">Capital Gains Tax Calculator Guide<\/a><\/li>\n<li><a href=\"\/blog\/how-to-avoid-capital-gains-tax-on-real-estate\/\">How to Avoid Capital Gains Tax on Real Estate<\/a><\/li>\n<li><a href=\"\/blog\/real-estate-roi-calculator-guide\/\">Real Estate ROI Calculator Guide<\/a><\/li>\n<\/ul>\n<p><\/p>\n<p> <\/p>\n<div class=\"cta-block\">\n<p><strong>Ready to calculate your 1031 exchange tax deferral?<\/strong><br \/>Enter your sale price, replacement price, and tax profile. The calculator handles the rest.<\/p>\n<p> <a href=\"\/1031-exchange-calculator\" class=\"cta-btn\">Calculate My Tax Deferral<\/a>\n <\/div>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"Sources_and_Further_Reading\"><\/span>Sources and Further Reading<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li><a href=\"https:\/\/www.irs.gov\/publications\/p544\" target=\"_blank\" rel=\"noopener noreferrer\">IRS Publication 544 \u2014 Sales and Other Dispositions of Assets<\/a><\/li>\n<li><a href=\"https:\/\/www.irs.gov\/newsroom\/like-kind-exchanges-real-estate-tax-tips\" target=\"_blank\" rel=\"noopener noreferrer\">IRS.gov \u2014 Like-Kind Exchanges: Real Estate Tax Tips<\/a><\/li>\n<li><a href=\"https:\/\/www.nar.realtor\/research-and-statistics\" target=\"_blank\" rel=\"noopener noreferrer\">National Association of Realtors \u2014 Research & Statistics<\/a><\/li>\n<li><a href=\"https:\/\/taxfoundation.org\/research\/all\/federal\/like-kind-exchanges-1031\/\" target=\"_blank\" rel=\"noopener noreferrer\">Tax Foundation \u2014 Economic Analysis of Like-Kind Exchange Rules<\/a><\/li>\n<\/ul>\n<\/article>\n<p><br \/>\n<script>\n function toggleFaq(btn) {\n const item = btn.closest('.faq-item');\n const isOpen = item.classList.contains('open');\n \/\/ Close all\n document.querySelectorAll('.faq-item.open').forEach(el => {\n el.classList.remove('open');\n el.querySelector('.faq-question').setAttribute('aria-expanded', 'false');\n });\n \/\/ Open clicked if it was closed\n if (!isOpen) {\n item.classList.add('open');\n btn.setAttribute('aria-expanded', 'true');\n }\n }\n<\/script><br \/>\n<\/body><br \/>\n<\/html><\/p>\n","protected":false},"excerpt":{"rendered":"<p>1031 Exchange Calculator: Tax Deferral Guide (2026) | ArvCalc 1031 Exchange Calculator: How to Calculate Tax Deferral (2026) Updated July 2026 12 min read By ArvCalc Editorial Picture this: you…<\/p>\n","protected":false},"author":0,"featured_media":630,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[18],"tags":[],"class_list":["post-620","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-guides"],"_links":{"self":[{"href":"https:\/\/arvcalc.com\/blog\/wp-json\/wp\/v2\/posts\/620","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/arvcalc.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/arvcalc.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/arvcalc.com\/blog\/wp-json\/wp\/v2\/comments?post=620"}],"version-history":[{"count":1,"href":"https:\/\/arvcalc.com\/blog\/wp-json\/wp\/v2\/posts\/620\/revisions"}],"predecessor-version":[{"id":621,"href":"https:\/\/arvcalc.com\/blog\/wp-json\/wp\/v2\/posts\/620\/revisions\/621"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/arvcalc.com\/blog\/wp-json\/wp\/v2\/media\/630"}],"wp:attachment":[{"href":"https:\/\/arvcalc.com\/blog\/wp-json\/wp\/v2\/media?parent=620"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/arvcalc.com\/blog\/wp-json\/wp\/v2\/categories?post=620"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/arvcalc.com\/blog\/wp-json\/wp\/v2\/tags?post=620"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}

{"id":620,"date":"2026-07-24T08:54:56","date_gmt":"2026-07-24T12:54:56","guid":{"rendered":"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-how-to-calculate-tax-deferral-2026\/"},"modified":"2026-07-24T08:54:57","modified_gmt":"2026-07-24T12:54:57","slug":"1031-exchange-calculator-guide","status":"publish","type":"post","link":"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/","title":{"rendered":"1031 Exchange Calculator: How to Calculate Tax Deferral (2026)"},"content":{"rendered":"

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\n 1031 Exchange Calculator: Tax Deferral Guide (2026) | ArvCalc<\/title><br \/>\n <meta name=\"description\" content=\"Calculate 1031 exchange tax deferral, boot, and timelines. Free calculator + worked examples with real numbers. Complete investor guide for 2026.\" \/><br \/>\n <meta name=\"robots\" content=\"index, follow\" \/>\n <link rel=\"canonical\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/\" \/>\n<style>\n \/* Base *\/\n *, *::before, *::after { box-sizing: border-box; margin: 0; padding: 0; }\n body { font-family: -apple-system, BlinkMacSystemFont, \"Segoe UI\", Roboto, Helvetica, Arial, sans-serif; font-size: 17px; line-height: 1.75; color: #1a1a1a; background: #fff; }\n a { color: #1d6fa4; text-decoration: none; }\n a:hover { text-decoration: underline; }<\/p>\n<p> \/* Layout *\/\n .article-wrap { max-width: 820px; margin: 0 auto; padding: 40px 20px 80px; }<\/p>\n<p> \/* Typography *\/\n h1 { font-size: 2.1rem; line-height: 1.25; font-weight: 800; margin-bottom: 18px; color: #111; }\n h2 { font-size: 1.55rem; font-weight: 700; margin: 52px 0 16px; color: #111; }\n h3 { font-size: 1.2rem; font-weight: 700; margin: 32px 0 12px; color: #222; }\n p { margin-bottom: 18px; }\n ul, 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14px; font-weight: 600; }\n td { padding: 10px 14px; border-bottom: 1px solid #e5e5e5; }\n tr:nth-child(even) td { background: #f8f9fb; }\n .num { text-align: right; font-variant-numeric: tabular-nums; }<\/p>\n<p> \/* CTA button *\/\n .cta-btn { display: inline-block; background: #1d6fa4; color: #fff !important; font-weight: 700; font-size: 1rem; padding: 14px 30px; border-radius: 6px; margin: 6px 0; text-decoration: none !important; }\n .cta-btn:hover { background: #155d8c; }\n .cta-block { text-align: center; margin: 40px 0; padding: 36px 24px; background: #f0f7fd; border-radius: 8px; }\n .cta-block p { margin-bottom: 18px; font-size: 1.05rem; }<\/p>\n<p> \/* FAQ accordion *\/\n .faq-list { margin: 0; list-style: none; padding: 0; }\n .faq-item { border: 1px solid #e0e0e0; border-radius: 6px; margin-bottom: 10px; overflow: hidden; }\n .faq-question { width: 100%; background: none; border: none; text-align: left; font-size: 1rem; font-weight: 700; cursor: pointer; padding: 16px 18px; 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50%; display: flex; align-items: center; justify-content: center; font-weight: 800; font-size: 0.95rem; }\n .mistake-body h3 { margin-top: 0; margin-bottom: 6px; font-size: 1.02rem; }\n .mistake-body p { margin: 0; font-size: 0.93rem; }<\/p>\n<p> @media (max-width: 600px) {\n h1 { font-size: 1.65rem; }\n h2 { font-size: 1.3rem; }\n .related-grid { grid-template-columns: 1fr; }\n }\n <\/style>\n<p><\/head><br \/>\n<body><\/p>\n<article class=\"article-wrap\">\n<p> <\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_83 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#1031_Exchange_Calculator_How_to_Calculate_Tax_Deferral_2026\" >1031 Exchange Calculator: How to Calculate Tax Deferral (2026)<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#What_Is_a_1031_Exchange_%E2%80%94_and_What_Does_the_Calculator_Actually_Measure\" >What Is a 1031 Exchange \u2014 and What Does the Calculator Actually Measure?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Realized_Gain_vs_Recognized_Gain_The_Core_Calculation\" >Realized Gain vs. Recognized Gain: The Core Calculation<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Step_1_%E2%80%94_Calculate_Adjusted_Basis\" >Step 1 \u2014 Calculate Adjusted Basis<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Step_2_%E2%80%94_Calculate_Realized_Gain\" >Step 2 \u2014 Calculate Realized Gain<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#1031_Exchange_Calculator_Worked_Example_1_%E2%80%94_Full_Deferral\" >1031 Exchange Calculator: Worked Example 1 \u2014 Full Deferral<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Tax_Saved_in_Example_1\" >Tax Saved in Example 1<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#1031_Exchange_Calculator_Worked_Example_2_%E2%80%94_Partial_Deferral_with_Boot\" >1031 Exchange Calculator: Worked Example 2 \u2014 Partial Deferral with Boot<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Boot_Calculation\" >Boot Calculation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Recognized_Taxable_Gain\" >Recognized (Taxable) Gain<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Tax_Owed_on_Boot\" >Tax Owed on Boot<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Boot_Calculator_What_Counts_as_Boot_and_How_to_Avoid_It\" >Boot Calculator: What Counts as Boot and How to Avoid It<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Cash_Boot\" >Cash Boot<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Mortgage_Boot_Debt_Relief\" >Mortgage Boot (Debt Relief)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Boot_Avoidance_Checklist\" >Boot Avoidance Checklist<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#1031_Exchange_Timeline_The_Deadlines_That_Can_Kill_Your_Deal\" >1031 Exchange Timeline: The Deadlines That Can Kill Your Deal<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Example_Timeline_Sale_Closes_August_1_2026\" >Example Timeline: Sale Closes August 1, 2026<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#5_Common_1031_Exchange_Mistakes_That_Cost_Investors_Thousands\" >5 Common 1031 Exchange Mistakes That Cost Investors Thousands<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Missing_the_45-Day_Identification_Window\" >Missing the 45-Day Identification Window<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Accidentally_Triggering_Boot\" >Accidentally Triggering Boot<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Related-Party_Transactions\" >Related-Party Transactions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Converting_to_Personal_Use_Too_Quickly\" >Converting to Personal Use Too Quickly<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-23\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Forgetting_Depreciation_Recapture_on_the_Carry-Forward_Basis\" >Forgetting Depreciation Recapture on the Carry-Forward Basis<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-24\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Capital_Gains_Tax_Rates_in_2026_Why_Deferral_Matters_More_Than_Ever\" >Capital Gains Tax Rates in 2026: Why Deferral Matters More Than Ever<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-25\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#What_Property_Qualifies_for_a_1031_Exchange\" >What Property Qualifies for a 1031 Exchange?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-26\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#How_to_Use_the_ArvCalc_1031_Exchange_Calculator\" >How to Use the ArvCalc 1031 Exchange Calculator<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-27\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Frequently_Asked_Questions\" >Frequently Asked Questions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-28\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Related_Calculators_and_Guides\" >Related Calculators and Guides<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-29\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Further_Reading\" >Further Reading<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-30\" href=\"https:\/\/arvcalc.com\/blog\/1031-exchange-calculator-guide\/#Sources_and_Further_Reading\" >Sources and Further Reading<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"1031_Exchange_Calculator_How_to_Calculate_Tax_Deferral_2026\"><\/span>1031 Exchange Calculator: How to Calculate Tax Deferral (2026)<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<p class=\"post-meta\">\n <span>Updated July 2026<\/span><br \/>\n <span>12 min read<\/span><br \/>\n <span>By ArvCalc Editorial<\/span>\n <\/p>\n<p> <\/p>\n<p>Picture this: you bought a rental duplex in Phoenix eight years ago for $300,000. Today you have a buyer offering $450,000. After closing costs, your net gain is north of $140,000 \u2014 and the IRS wants a chunk of it. Between <strong>federal capital gains tax at 15\u201320%<\/strong>, <strong>depreciation recapture at 25%<\/strong>, and state tax that can add another 3\u201313%, you could hand over $40,000\u2013$60,000 before you even touch the next deal.<\/p>\n<p>A <strong>1031 exchange calculator<\/strong> lets you model exactly how much of that bill disappears when you reinvest the proceeds into a like-kind replacement property instead of pocketing the cash. This guide walks through the rules, the math, two detailed worked examples, every deadline you need to hit, and the mistakes that blow up otherwise solid deals.<\/p>\n<div class=\"callout\">\n<div class=\"callout-title\">Quick Start<\/div>\n<p>Skip the theory? Plug your numbers into our free <a href=\"\/1031-exchange-calculator\">1031 exchange calculator<\/a> and get your tax deferral estimate in under two minutes. Then come back here to understand what the numbers mean.<\/p>\n<\/p><\/div>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_Is_a_1031_Exchange_%E2%80%94_and_What_Does_the_Calculator_Actually_Measure\"><\/span>What Is a 1031 Exchange \u2014 and What Does the Calculator Actually Measure?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Section 1031 of the Internal Revenue Code lets real estate investors defer capital gains taxes when they sell a property and reinvest the proceeds into a “like-kind” replacement. The tax does not go away permanently \u2014 it rolls forward into the basis of the new property \u2014 but deferral keeps your full equity working in the next deal rather than shrinking by 20\u201340% on the way out.<\/p>\n<p>A <strong>1031 exchange calculator<\/strong> measures three things simultaneously:<\/p>\n<ul>\n<li><strong>Realized gain<\/strong> \u2014 the difference between your net sale price and your adjusted basis (original cost minus accumulated depreciation)<\/li>\n<li><strong>Recognized gain<\/strong> \u2014 the portion of that gain you must pay tax on right now, usually because you received cash out (called “boot”)<\/li>\n<li><strong>Deferred gain<\/strong> \u2014 the portion successfully rolled over, which becomes the carry-forward basis of the replacement property<\/li>\n<\/ul>\n<p>For a complete primer on the mechanics, see our full <a href=\"\/blog\/1031-exchange-real-estate-guide\/\">1031 exchange real estate guide<\/a>. For the strict IRS rules that govern what qualifies, the primary authority is <a href=\"https:\/\/www.irs.gov\/publications\/p544\" target=\"_blank\" rel=\"noopener noreferrer\">IRS Publication 544: Sales and Other Dispositions of Assets<\/a> and the <a href=\"https:\/\/www.irs.gov\/newsroom\/like-kind-exchanges-real-estate-tax-tips\" target=\"_blank\" rel=\"noopener noreferrer\">IRS like-kind exchange guidance<\/a>.<\/p>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"Realized_Gain_vs_Recognized_Gain_The_Core_Calculation\"><\/span>Realized Gain vs. Recognized Gain: The Core Calculation<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Before you can use a 1031 exchange calculator, you need two foundation numbers.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Step_1_%E2%80%94_Calculate_Adjusted_Basis\"><\/span>Step 1 \u2014 Calculate Adjusted Basis<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Your adjusted basis starts with what you paid, then shifts over time:<\/p>\n<div class=\"table-wrap\">\n<table>\n<thead>\n<tr>\n<th>Item<\/th>\n<th class=\"num\">Amount<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Original purchase price<\/td>\n<td class=\"num\">$300,000<\/td>\n<\/tr>\n<tr>\n<td>+ Capital improvements<\/td>\n<td class=\"num\">$20,000<\/td>\n<\/tr>\n<tr>\n<td>\u2212 Accumulated depreciation (8 yrs \u00d7 ~$9,090\/yr)<\/td>\n<td class=\"num\">\u2212$72,720<\/td>\n<\/tr>\n<tr>\n<td><strong>= Adjusted basis<\/strong><\/td>\n<td class=\"num\"><strong>$247,280<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<p>Use our <a href=\"\/depreciation-calculator\">depreciation calculator<\/a> to get your annual deduction figure if you are not sure how much basis you have already used up. This matters because the IRS taxes depreciation recapture at a flat <strong>25%<\/strong>, separate from the long-term capital gains rate.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Step_2_%E2%80%94_Calculate_Realized_Gain\"><\/span>Step 2 \u2014 Calculate Realized Gain<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"table-wrap\">\n<table>\n<thead>\n<tr>\n<th>Item<\/th>\n<th class=\"num\">Amount<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Gross sale price<\/td>\n<td class=\"num\">$450,000<\/td>\n<\/tr>\n<tr>\n<td>\u2212 Selling costs (commission, closing fees ~5%)<\/td>\n<td class=\"num\">\u2212$22,500<\/td>\n<\/tr>\n<tr>\n<td>= Amount realized<\/td>\n<td class=\"num\">$427,500<\/td>\n<\/tr>\n<tr>\n<td>\u2212 Adjusted basis<\/td>\n<td class=\"num\">\u2212$247,280<\/td>\n<\/tr>\n<tr>\n<td><strong>= Realized gain<\/strong><\/td>\n<td class=\"num\"><strong>$180,220<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<p>That $180,220 breaks into two tax “buckets”: $72,720 of depreciation recapture (taxed at 25%) and $107,500 of long-term capital gain (taxed at 15% or 20% federally, depending on your income).<\/p>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"1031_Exchange_Calculator_Worked_Example_1_%E2%80%94_Full_Deferral\"><\/span>1031 Exchange Calculator: Worked Example 1 \u2014 Full Deferral<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<div class=\"callout green\">\n<div class=\"callout-title\">Scenario A \u2014 Sell $450K, Buy $500K, Zero Boot<\/div>\n<p><strong>Reinhvest everything. Defer everything.<\/strong><\/p>\n<\/p><\/div>\n<p>Maria sells her Phoenix duplex for $450,000 (net proceeds after costs: $427,500) and uses a qualified intermediary to buy a replacement property in Scottsdale for $500,000. She does not pocket any cash.<\/p>\n<div class=\"table-wrap\">\n<table>\n<thead>\n<tr>\n<th>Line Item<\/th>\n<th class=\"num\">Amount<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Sale price<\/td>\n<td class=\"num\">$450,000<\/td>\n<\/tr>\n<tr>\n<td>Selling costs<\/td>\n<td class=\"num\">\u2212$22,500<\/td>\n<\/tr>\n<tr>\n<td>Amount realized<\/td>\n<td class=\"num\">$427,500<\/td>\n<\/tr>\n<tr>\n<td>Adjusted basis of relinquished property<\/td>\n<td class=\"num\">$247,280<\/td>\n<\/tr>\n<tr>\n<td>Realized gain<\/td>\n<td class=\"num\">$180,220<\/td>\n<\/tr>\n<tr>\n<td>Boot received<\/td>\n<td class=\"num\">$0<\/td>\n<\/tr>\n<tr>\n<td><strong>Recognized (taxable) gain<\/strong><\/td>\n<td class=\"num\"><strong>$0<\/strong><\/td>\n<\/tr>\n<tr>\n<td><strong>Deferred gain<\/strong><\/td>\n<td class=\"num\"><strong>$180,220<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<h3><span class=\"ez-toc-section\" id=\"Tax_Saved_in_Example_1\"><\/span>Tax Saved in Example 1<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"table-wrap\">\n<table>\n<thead>\n<tr>\n<th>Tax Component<\/th>\n<th class=\"num\">Gain Subject to Tax<\/th>\n<th class=\"num\">Rate<\/th>\n<th class=\"num\">Tax Without Exchange<\/th>\n<th class=\"num\">Tax With Exchange<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Depreciation recapture<\/td>\n<td class=\"num\">$72,720<\/td>\n<td class=\"num\">25%<\/td>\n<td class=\"num\">$18,180<\/td>\n<td class=\"num\">$0<\/td>\n<\/tr>\n<tr>\n<td>Federal capital gains (15%)<\/td>\n<td class=\"num\">$107,500<\/td>\n<td class=\"num\">15%<\/td>\n<td class=\"num\">$16,125<\/td>\n<td class=\"num\">$0<\/td>\n<\/tr>\n<tr>\n<td>State tax (AZ ~4.5% approx.)<\/td>\n<td class=\"num\">$180,220<\/td>\n<td class=\"num\">4.5%<\/td>\n<td class=\"num\">$8,110<\/td>\n<td class=\"num\">$0<\/td>\n<\/tr>\n<tr>\n<td><strong>Total<\/strong><\/td>\n<td class=\"num\"><\/td>\n<td class=\"num\"><\/td>\n<td class=\"num\"><strong>$42,415<\/strong><\/td>\n<td class=\"num\"><strong>$0<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<p><strong>Maria defers $42,415 in tax by doing the exchange.<\/strong> That capital stays fully deployed into the $500,000 replacement property, compounding rather than evaporating.<\/p>\n<p>The replacement property’s starting basis is $500,000 minus the $180,220 deferred gain, leaving Maria with a <strong>carryover basis of $319,780<\/strong>. If she sells later without another exchange, that deferred gain surfaces at that point \u2014 but by then, she may have stepped up the property’s value considerably.<\/p>\n<div class=\"cta-block\">\n<p>Want to run your own numbers? Our free <a href=\"\/1031-exchange-calculator\">1031 exchange calculator<\/a> handles depreciation recapture, boot, and state tax in one place.<\/p>\n<p> <a href=\"\/1031-exchange-calculator\" class=\"cta-btn\">Open the Calculator<\/a>\n <\/div>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"1031_Exchange_Calculator_Worked_Example_2_%E2%80%94_Partial_Deferral_with_Boot\"><\/span>1031 Exchange Calculator: Worked Example 2 \u2014 Partial Deferral with Boot<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<div class=\"callout amber\">\n<div class=\"callout-title\">Scenario B \u2014 Sell $450K, Buy $400K, $50K Boot<\/div>\n<p><strong>Downgrade the replacement. Pay tax on the difference.<\/strong><\/p>\n<\/p><\/div>\n<p>James sells the same duplex but buys a smaller replacement property for $400,000, keeping the $27,500 difference in cash. That $27,500 in cash plus any mortgage relief he received is “boot” \u2014 and it triggers a partial tax bill immediately.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Boot_Calculation\"><\/span>Boot Calculation<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"table-wrap\">\n<table>\n<thead>\n<tr>\n<th>Item<\/th>\n<th class=\"num\">Amount<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Net proceeds (after selling costs)<\/td>\n<td class=\"num\">$427,500<\/td>\n<\/tr>\n<tr>\n<td>Replacement property purchase price<\/td>\n<td class=\"num\">$400,000<\/td>\n<\/tr>\n<tr>\n<td><strong>Cash boot received<\/strong><\/td>\n<td class=\"num\"><strong>$27,500<\/strong><\/td>\n<\/tr>\n<tr>\n<td>Old mortgage paid off<\/td>\n<td class=\"num\">$120,000<\/td>\n<\/tr>\n<tr>\n<td>New mortgage assumed<\/td>\n<td class=\"num\">$95,000<\/td>\n<\/tr>\n<tr>\n<td>Mortgage relief (net boot)<\/td>\n<td class=\"num\">$25,000<\/td>\n<\/tr>\n<tr>\n<td><strong>Total boot<\/strong><\/td>\n<td class=\"num\"><strong>$52,500<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<p>Mortgage relief counts as boot because James is walking away from less debt than he carried before. For a full breakdown of every item that triggers boot, see our dedicated <a href=\"\/blog\/1031-exchange-boot\/\">1031 exchange boot guide<\/a>.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Recognized_Taxable_Gain\"><\/span>Recognized (Taxable) Gain<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Recognized gain equals the <em>lesser<\/em> of (a) total boot received or (b) total realized gain.<\/p>\n<div class=\"table-wrap\">\n<table>\n<thead>\n<tr>\n<th>Item<\/th>\n<th class=\"num\">Amount<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Realized gain<\/td>\n<td class=\"num\">$180,220<\/td>\n<\/tr>\n<tr>\n<td>Total boot received<\/td>\n<td class=\"num\">$52,500<\/td>\n<\/tr>\n<tr>\n<td><strong>Recognized gain (lesser of the two)<\/strong><\/td>\n<td class=\"num\"><strong>$52,500<\/strong><\/td>\n<\/tr>\n<tr>\n<td>Deferred gain ($180,220 \u2212 $52,500)<\/td>\n<td class=\"num\">$127,720<\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<h3><span class=\"ez-toc-section\" id=\"Tax_Owed_on_Boot\"><\/span>Tax Owed on Boot<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"table-wrap\">\n<table>\n<thead>\n<tr>\n<th>Tax Component<\/th>\n<th class=\"num\">Taxable Gain<\/th>\n<th class=\"num\">Rate<\/th>\n<th class=\"num\">Tax Owed<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Depreciation recapture (first priority)<\/td>\n<td class=\"num\">$52,500<\/td>\n<td class=\"num\">25%<\/td>\n<td class=\"num\">$13,125<\/td>\n<\/tr>\n<tr>\n<td>Federal long-term capital gains<\/td>\n<td class=\"num\">$0<\/td>\n<td class=\"num\">15%<\/td>\n<td class=\"num\">$0<\/td>\n<\/tr>\n<tr>\n<td>State tax (AZ ~4.5%)<\/td>\n<td class=\"num\">$52,500<\/td>\n<td class=\"num\">4.5%<\/td>\n<td class=\"num\">$2,363<\/td>\n<\/tr>\n<tr>\n<td><strong>Total tax owed now<\/strong><\/td>\n<td class=\"num\"><\/td>\n<td class=\"num\"><\/td>\n<td class=\"num\"><strong>$15,488<\/strong><\/td>\n<\/tr>\n<tr>\n<td><strong>Deferred (not owed now)<\/strong><\/td>\n<td class=\"num\">$127,720<\/td>\n<td class=\"num\"><\/td>\n<td class=\"num\"><strong>~$27,000 est.<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<p>Note that the IRS applies boot first to depreciation recapture, then to capital gains. Because the $52,500 boot is less than the $72,720 depreciation recapture, James’s entire taxable gain falls into the 25% recapture bucket \u2014 he owes nothing at the capital gains rate yet.<\/p>\n<div class=\"callout red\">\n<div class=\"callout-title\">Watch Out<\/div>\n<p>Taking even a small amount of cash boot can be surprisingly expensive. In Example 2, pocketing $27,500 in cash resulted in $13,125 in federal tax alone \u2014 nearly a 48% effective rate on that cash \u2014 because it hit depreciation recapture first.<\/p>\n<\/p><\/div>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"Boot_Calculator_What_Counts_as_Boot_and_How_to_Avoid_It\"><\/span>Boot Calculator: What Counts as Boot and How to Avoid It<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Boot is any value you receive that is not “like-kind” real property. It collapses your deferral dollar-for-dollar, up to the limit of your realized gain. There are two types:<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Cash_Boot\"><\/span>Cash Boot<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Cash or near-cash items you receive at closing<\/li>\n<li>Closing costs paid from exchange proceeds that are not “exchange expenses” (e.g., property inspections, prorated rent, security deposits)<\/li>\n<li>Personal property received (appliances, vehicles, equipment transferred separately)<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Mortgage_Boot_Debt_Relief\"><\/span>Mortgage Boot (Debt Relief)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>If the old mortgage was $200,000 and the new mortgage is $150,000, the $50,000 difference is mortgage boot<\/li>\n<li>You can offset mortgage boot with cash \u2014 pay an extra $50,000 into the replacement to neutralize it<\/li>\n<li>You cannot offset cash boot with mortgage boot \u2014 they run in one direction only<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Boot_Avoidance_Checklist\"><\/span>Boot Avoidance Checklist<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Replacement property purchase price equal to or greater than net sale price<\/li>\n<li>New debt equal to or greater than old debt (or make up the difference in cash)<\/li>\n<li>All proceeds flow through the qualified intermediary \u2014 never touch them yourself<\/li>\n<li>Pay allowable exchange expenses from exchange funds only<\/li>\n<li>Avoid receiving personal property in the deal (negotiate separate transfer outside the exchange if needed)<\/li>\n<\/ul>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"1031_Exchange_Timeline_The_Deadlines_That_Can_Kill_Your_Deal\"><\/span>1031 Exchange Timeline: The Deadlines That Can Kill Your Deal<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The IRS gives you a strict two-step deadline. Miss either one and the exchange fails \u2014 full stop. See our dedicated <a href=\"\/blog\/1031-exchange-timeline-deadlines-guide\/\">1031 exchange timeline and deadlines guide<\/a> for how to build a compliant calendar.<\/p>\n<div class=\"timeline\">\n<div class=\"timeline-item\">\n<div class=\"timeline-label\">Day 0 \u2014 Closing on Relinquished Property<\/div>\n<p>The clock starts the moment you close the sale. Funds must go directly to a <strong>qualified intermediary (QI)<\/strong> \u2014 never to you or your attorney’s trust account. Receiving even $1 directly breaks the exchange.<\/p>\n<\/p><\/div>\n<div class=\"timeline-item\">\n<div class=\"timeline-label\">Day 45 \u2014 Identification Deadline<\/div>\n<p>You must identify potential replacement properties in writing, signed and delivered to the QI or seller by <strong>midnight of Day 45<\/strong>. You have three options: identify up to 3 properties (3-property rule), any number worth up to 200% of relinquished value (200% rule), or any number if you close on 95% of identified value (95% rule). Most investors use the 3-property rule \u2014 it is the safest.<\/p>\n<\/p><\/div>\n<div class=\"timeline-item\">\n<div class=\"timeline-label\">Day 180 \u2014 Closing Deadline<\/div>\n<p>You must close on a replacement from your identified list by <strong>Day 180<\/strong> (or the due date of your tax return including extensions, whichever is earlier). There are almost no exceptions. Extensions are granted only for presidentially declared disasters.<\/p>\n<\/p><\/div>\n<\/p><\/div>\n<h3><span class=\"ez-toc-section\" id=\"Example_Timeline_Sale_Closes_August_1_2026\"><\/span>Example Timeline: Sale Closes August 1, 2026<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"table-wrap\">\n<table>\n<thead>\n<tr>\n<th>Milestone<\/th>\n<th>Date<\/th>\n<th>Days from Close<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Relinquished property closes<\/td>\n<td>August 1, 2026<\/td>\n<td>Day 0<\/td>\n<\/tr>\n<tr>\n<td>Identification deadline<\/td>\n<td>September 15, 2026<\/td>\n<td>Day 45<\/td>\n<\/tr>\n<tr>\n<td>Exchange closes (latest)<\/td>\n<td>January 28, 2027<\/td>\n<td>Day 180<\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<div class=\"callout amber\">\n<div class=\"callout-title\">Tax Return Overlap Warning<\/div>\n<p>If your tax return is due before Day 180 (e.g., April 15 for an exchange that started in late October), the exchange must close by the return due date unless you file an extension. Always file the extension proactively \u2014 it costs nothing and protects the full 180 days.<\/p>\n<\/p><\/div>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"5_Common_1031_Exchange_Mistakes_That_Cost_Investors_Thousands\"><\/span>5 Common 1031 Exchange Mistakes That Cost Investors Thousands<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul class=\"mistake-list\">\n<li class=\"mistake-item\">\n<div class=\"mistake-num\">1<\/div>\n<div class=\"mistake-body\">\n<h3><span class=\"ez-toc-section\" id=\"Missing_the_45-Day_Identification_Window\"><\/span>Missing the 45-Day Identification Window<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>This is the most common failure point. Investors close the sale, then spend weeks searching for properties before realizing the 45-day clock started the day they closed \u2014 not the day they started looking. Prepare your short-list of replacement candidates before you list the relinquished property. Forty-five days sounds like a lot until escrow delays, inspection issues, and holiday weekends eat into it.<\/p>\n<\/p><\/div>\n<\/li>\n<li class=\"mistake-item\">\n<div class=\"mistake-num\">2<\/div>\n<div class=\"mistake-body\">\n<h3><span class=\"ez-toc-section\" id=\"Accidentally_Triggering_Boot\"><\/span>Accidentally Triggering Boot<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Paying for repairs, inspections, or prorated HOA dues from exchange funds creates boot if those costs are not “exchange expenses.” Similarly, buying a replacement for less than the relinquished net sale price creates cash boot equal to the difference. Run the boot calculation before you go under contract, not after.<\/p>\n<\/p><\/div>\n<\/li>\n<li class=\"mistake-item\">\n<div class=\"mistake-num\">3<\/div>\n<div class=\"mistake-body\">\n<h3><span class=\"ez-toc-section\" id=\"Related-Party_Transactions\"><\/span>Related-Party Transactions<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Buying a replacement property from a family member (spouse, parent, sibling, or entity you control) requires a 2-year holding period for both parties after the exchange. If either party sells within 2 years, the exchange is disallowed retroactively. The IRS watches related-party exchanges closely \u2014 document your arm’s-length rationale carefully if the situation arises.<\/p>\n<\/p><\/div>\n<\/li>\n<li class=\"mistake-item\">\n<div class=\"mistake-num\">4<\/div>\n<div class=\"mistake-body\">\n<h3><span class=\"ez-toc-section\" id=\"Converting_to_Personal_Use_Too_Quickly\"><\/span>Converting to Personal Use Too Quickly<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>A replacement property must be held for productive use in a trade or business or for investment. Moving into it or converting it to a vacation home too quickly can disqualify the exchange. The IRS Rev. Proc. 2008-16 safe harbor requires 24 months of qualified use before any personal-use conversion, with personal use capped at 14 days or 10% of rental days per year.<\/p>\n<\/p><\/div>\n<\/li>\n<li class=\"mistake-item\">\n<div class=\"mistake-num\">5<\/div>\n<div class=\"mistake-body\">\n<h3><span class=\"ez-toc-section\" id=\"Forgetting_Depreciation_Recapture_on_the_Carry-Forward_Basis\"><\/span>Forgetting Depreciation Recapture on the Carry-Forward Basis<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>When you eventually sell the replacement property without another exchange, the IRS collects both the current gain and the previously deferred depreciation recapture. Investors who plan to hold forever sometimes forget this liability sitting in their basis. Use our <a href=\"\/depreciation-calculator\">depreciation calculator<\/a> to track cumulative recapture exposure across properties so you are never surprised.<\/p>\n<\/p><\/div>\n<\/li>\n<\/ul>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"Capital_Gains_Tax_Rates_in_2026_Why_Deferral_Matters_More_Than_Ever\"><\/span>Capital Gains Tax Rates in 2026: Why Deferral Matters More Than Ever<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Understanding the tax rates your calculator is working against puts the savings in context. For 2026, federal long-term capital gains rates are:<\/p>\n<div class=\"table-wrap\">\n<table>\n<thead>\n<tr>\n<th>Filing Status<\/th>\n<th>Income (2026 est.)<\/th>\n<th class=\"num\">Rate<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Single<\/td>\n<td>Up to ~$47,000<\/td>\n<td class=\"num\">0%<\/td>\n<\/tr>\n<tr>\n<td>Single<\/td>\n<td>~$47,001\u2013$518,000<\/td>\n<td class=\"num\">15%<\/td>\n<\/tr>\n<tr>\n<td>Single<\/td>\n<td>Above ~$518,000<\/td>\n<td class=\"num\">20%<\/td>\n<\/tr>\n<tr>\n<td>MFJ<\/td>\n<td>Up to ~$94,000<\/td>\n<td class=\"num\">0%<\/td>\n<\/tr>\n<tr>\n<td>MFJ<\/td>\n<td>~$94,001\u2013$583,000<\/td>\n<td class=\"num\">15%<\/td>\n<\/tr>\n<tr>\n<td>MFJ<\/td>\n<td>Above ~$583,000<\/td>\n<td class=\"num\">20%<\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<p>On top of federal rates, high earners may owe the 3.8% Net Investment Income Tax (NIIT) on gains, and <strong>state tax varies widely<\/strong> \u2014 from 0% in Texas and Florida to over 13% in California. Our <a href=\"\/capital-gains-tax-calculator\">capital gains tax calculator<\/a> lets you model the combined federal + state + NIIT liability before you decide whether to exchange or simply sell. See also our <a href=\"\/blog\/capital-gains-tax-calculator-guide\/\">capital gains tax calculator guide<\/a> for a walkthrough of all the inputs.<\/p>\n<p>Depreciation recapture runs at a separate flat <strong>25% federal rate<\/strong> regardless of your income bracket, plus applicable state tax. This is often the largest single tax item for long-term holders, because rental properties accumulate depreciation steadily \u2014 approximately 3.636% of the building value per year over 27.5 years. For a property with a $250,000 building value, that is $9,090 per year compounding into recapture exposure.<\/p>\n<p>If you are exploring ways to reduce your overall tax exposure beyond the 1031 exchange, our article on <a href=\"\/blog\/how-to-avoid-capital-gains-tax-on-real-estate\/\">how to avoid capital gains tax on real estate<\/a> covers opportunity zones, installment sales, charitable remainder trusts, and stepped-up basis strategies.<\/p>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_Property_Qualifies_for_a_1031_Exchange\"><\/span>What Property Qualifies for a 1031 Exchange?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The IRS definition of “like-kind” for real property is broad \u2014 almost any real estate used for investment or business qualifies:<\/p>\n<ul>\n<li>Residential rentals (single-family, duplexes, apartments)<\/li>\n<li>Commercial properties (office, retail, industrial, storage)<\/li>\n<li>Raw land held for investment<\/li>\n<li>Triple-net leased properties<\/li>\n<li>Tenant-in-common (TIC) interests<\/li>\n<li>Delaware Statutory Trust (DST) interests<\/li>\n<\/ul>\n<p>What does <em>not<\/em> qualify:<\/p>\n<ul>\n<li>Primary residence or personal vacation home (unless you meet mixed-use carve-out rules)<\/li>\n<li>Property held primarily for sale (fix-and-flip inventory, dealer property)<\/li>\n<li>Stocks, bonds, partnership interests, or other securities<\/li>\n<li>Foreign real estate exchanged for U.S. real estate (must be like-kind in the same country)<\/li>\n<\/ul>\n<p>According to the <a href=\"https:\/\/www.nar.realtor\/research-and-statistics\" target=\"_blank\" rel=\"noopener noreferrer\">National Association of Realtors<\/a>, 1031 exchanges account for a meaningful share of commercial real estate transactions annually \u2014 investors cite tax deferral as the primary reason they reinvest rather than cash out. The <a href=\"https:\/\/taxfoundation.org\/research\/all\/federal\/like-kind-exchanges-1031\/\" target=\"_blank\" rel=\"noopener noreferrer\">Tax Foundation’s analysis of like-kind exchange rules<\/a> estimates that eliminating Section 1031 would significantly reduce real estate investment and property maintenance nationwide.<\/p>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_to_Use_the_ArvCalc_1031_Exchange_Calculator\"><\/span>How to Use the ArvCalc 1031 Exchange Calculator<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Our <a href=\"\/1031-exchange-calculator\">1031 exchange calculator<\/a> walks through four input sections:<\/p>\n<ol>\n<li><strong>Relinquished property details<\/strong> \u2014 sale price, selling costs, original purchase price, capital improvements, accumulated depreciation. If you need the depreciation figure, use the <a href=\"\/depreciation-calculator\">depreciation calculator<\/a> first.<\/li>\n<li><strong>Replacement property details<\/strong> \u2014 purchase price, buying costs, new debt. This lets the calculator determine boot automatically.<\/li>\n<li><strong>Tax profile<\/strong> \u2014 filing status, total household income, state of sale. These inputs determine which capital gains rate applies.<\/li>\n<li><strong>Results<\/strong> \u2014 the calculator shows realized gain, recognized gain, deferred gain, depreciation recapture amount, total tax without exchange, tax with exchange (if any boot), and dollars saved.<\/li>\n<\/ol>\n<p>Run the calculator at the beginning of your deal analysis, not at the end. Knowing the tax exposure upfront shapes how aggressively you need to replace \u2014 sometimes a partial exchange with modest boot is actually smarter than overpaying for a replacement just to avoid a small recapture bill.<\/p>\n<p>For a broader picture of your investment returns, pair the 1031 analysis with our <a href=\"\/rental-property-calculator\">rental property calculator<\/a> to project cash-on-cash return, cap rate, and annual cash flow on the replacement. The <a href=\"\/blog\/real-estate-roi-calculator-guide\/\">real estate ROI calculator guide<\/a> explains how to read those outputs in the context of an exchange \u2014 especially when your carry-forward basis changes future depreciation on the replacement.<\/p>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"Frequently_Asked_Questions\"><\/span>Frequently Asked Questions<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul class=\"faq-list\" id=\"faq\">\n<li class=\"faq-item open\">\n <button class=\"faq-question\" aria-expanded=\"true\" onclick=\"toggleFaq(this)\"><br \/>\n Can I do a 1031 exchange on my primary residence?<br \/>\n <span class=\"faq-icon\">+<\/span><br \/>\n <\/button><\/p>\n<div class=\"faq-answer\">\n<p>No \u2014 Section 1031 applies only to property held for investment or productive use in a trade or business. Your primary home qualifies for a different exclusion: up to $250,000 (single) or $500,000 (married filing jointly) of gain is excluded under IRC Section 121 if you lived there 2 of the past 5 years. If you have a rental portion of a mixed-use property, a partial exchange may be possible for the rental fraction \u2014 consult a tax advisor for split-use situations.<\/p>\n<\/p><\/div>\n<\/li>\n<li class=\"faq-item\">\n <button class=\"faq-question\" aria-expanded=\"false\" onclick=\"toggleFaq(this)\"><br \/>\n How many replacement properties can I identify?<br \/>\n <span class=\"faq-icon\">+<\/span><br \/>\n <\/button><\/p>\n<div class=\"faq-answer\">\n<p>Under the standard 3-property rule, you can identify up to three replacement properties regardless of their combined value. Under the 200% rule, you can identify any number of properties as long as their combined fair market value does not exceed 200% of the relinquished property’s value. Under the 95% rule, you can identify any number of properties of any value, but you must close on at least 95% of the total identified value \u2014 a very high bar that trips up most investors who try it.<\/p>\n<\/p><\/div>\n<\/li>\n<li class=\"faq-item\">\n <button class=\"faq-question\" aria-expanded=\"false\" onclick=\"toggleFaq(this)\"><br \/>\n What happens to the deferred gain if I die before selling the replacement?<br \/>\n <span class=\"faq-icon\">+<\/span><br \/>\n <\/button><\/p>\n<div class=\"faq-answer\">\n<p>This is one of the most powerful estate planning aspects of the 1031 exchange. When the property passes to your heirs at death, it receives a stepped-up basis equal to fair market value at the date of death. The accumulated deferred gain \u2014 including all the depreciation recapture \u2014 permanently disappears. Heirs inherit the property with a clean slate and owe no tax on the gain you built up. This makes long-term hold-and-exchange strategies particularly effective for estate planning.<\/p>\n<\/p><\/div>\n<\/li>\n<li class=\"faq-item\">\n <button class=\"faq-question\" aria-expanded=\"false\" onclick=\"toggleFaq(this)\"><br \/>\n Do I need a qualified intermediary (QI)?<br \/>\n <span class=\"faq-icon\">+<\/span><br \/>\n <\/button><\/p>\n<div class=\"faq-answer\">\n<p>Yes, in virtually all cases. A qualified intermediary holds the exchange proceeds between the sale and the replacement purchase, preventing you from having “actual or constructive receipt” of the funds. If you receive the money \u2014 even briefly \u2014 the exchange fails and the full gain becomes taxable in the year of sale. Your attorney, accountant, or real estate agent generally cannot serve as QI due to the “disqualified person” rules. Always use an independent, established QI with errors-and-omissions coverage and segregated client accounts.<\/p>\n<\/p><\/div>\n<\/li>\n<li class=\"faq-item\">\n <button class=\"faq-question\" aria-expanded=\"false\" onclick=\"toggleFaq(this)\"><br \/>\n Can I exchange into multiple replacement properties?<br \/>\n <span class=\"faq-icon\">+<\/span><br \/>\n <\/button><\/p>\n<div class=\"faq-answer\">\n<p>Yes. You can buy more than one replacement property as long as each property was on your identified list and you close on all of them within the 180-day window. This is common when investors use exchange proceeds to diversify from one large property into several smaller ones. Each replacement property gets its own portion of the carry-forward basis, allocated in proportion to the price paid for each.<\/p>\n<\/p><\/div>\n<\/li>\n<li class=\"faq-item\">\n <button class=\"faq-question\" aria-expanded=\"false\" onclick=\"toggleFaq(this)\"><br \/>\n Is boot always bad? Should I always try to avoid it?<br \/>\n <span class=\"faq-icon\">+<\/span><br \/>\n <\/button><\/p>\n<div class=\"faq-answer\">\n<p>Not necessarily. Sometimes taking boot makes financial sense \u2014 if the only available replacement properties are overpriced, overpaying by $80,000 to avoid a $20,000 tax bill is a poor trade. The question is whether the after-tax cash from boot is more valuable than the equity locked into an inferior replacement. Run both scenarios through the calculator: full exchange vs. partial exchange with boot. The answer depends on your income tax rate, the replacement’s expected returns, and your alternative investment options.<\/p>\n<\/p><\/div>\n<\/li>\n<li class=\"faq-item\">\n <button class=\"faq-question\" aria-expanded=\"false\" onclick=\"toggleFaq(this)\"><br \/>\n What is a reverse 1031 exchange and can I calculate it the same way?<br \/>\n <span class=\"faq-icon\">+<\/span><br \/>\n <\/button><\/p>\n<div class=\"faq-answer\">\n<p>A reverse exchange lets you acquire the replacement property first, before selling the relinquished property. An Exchange Accommodation Titleholder (EAT) takes title to the parked property while you line up the sale. The same 45-day identification and 180-day closing rules apply, running from the date the EAT takes title. The tax math is identical \u2014 realized gain, boot, deferred gain all calculate the same way. The difference is complexity and cost: reverse exchanges typically cost $10,000\u2013$20,000 more in fees than forward exchanges.<\/p>\n<\/p><\/div>\n<\/li>\n<\/ul>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"Related_Calculators_and_Guides\"><\/span>Related Calculators and Guides<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<div class=\"related-grid\">\n <a href=\"\/1031-exchange-calculator\" class=\"related-card\"><\/p>\n<div class=\"related-card-title\">1031 Exchange Calculator<\/div>\n<p>Compute tax deferral, boot, and deferred gain in one step.<\/p>\n<p> <\/a><br \/>\n <a href=\"\/capital-gains-tax-calculator\" class=\"related-card\"><\/p>\n<div class=\"related-card-title\">Capital Gains Tax Calculator<\/div>\n<p>Federal + state + NIIT estimate for any real estate sale.<\/p>\n<p> <\/a><br \/>\n <a href=\"\/rental-property-calculator\" class=\"related-card\"><\/p>\n<div class=\"related-card-title\">Rental Property Calculator<\/div>\n<p>Cap rate, cash-on-cash return, and NOI for any rental.<\/p>\n<p> <\/a><br \/>\n <a href=\"\/depreciation-calculator\" class=\"related-card\"><\/p>\n<div class=\"related-card-title\">Depreciation Calculator<\/div>\n<p>Annual deduction and accumulated recapture exposure by year.<\/p>\n<p> <\/a>\n <\/div>\n<p><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Further_Reading\"><\/span>Further Reading<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li><a href=\"\/blog\/1031-exchange-real-estate-guide\/\">Complete 1031 Exchange Guide for Real Estate Investors<\/a><\/li>\n<li><a href=\"\/blog\/1031-exchange-timeline-deadlines-guide\/\">1031 Exchange Timeline and Deadlines \u2014 How to Build a Compliant Calendar<\/a><\/li>\n<li><a href=\"\/blog\/1031-exchange-boot\/\">1031 Exchange Boot: What It Is and How to Avoid It<\/a><\/li>\n<li><a href=\"\/blog\/capital-gains-tax-calculator-guide\/\">Capital Gains Tax Calculator Guide<\/a><\/li>\n<li><a href=\"\/blog\/how-to-avoid-capital-gains-tax-on-real-estate\/\">How to Avoid Capital Gains Tax on Real Estate<\/a><\/li>\n<li><a href=\"\/blog\/real-estate-roi-calculator-guide\/\">Real Estate ROI Calculator Guide<\/a><\/li>\n<\/ul>\n<p><\/p>\n<p> <\/p>\n<div class=\"cta-block\">\n<p><strong>Ready to calculate your 1031 exchange tax deferral?<\/strong><br \/>Enter your sale price, replacement price, and tax profile. The calculator handles the rest.<\/p>\n<p> <a href=\"\/1031-exchange-calculator\" class=\"cta-btn\">Calculate My Tax Deferral<\/a>\n <\/div>\n<p> <\/p>\n<h2><span class=\"ez-toc-section\" id=\"Sources_and_Further_Reading\"><\/span>Sources and Further Reading<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li><a href=\"https:\/\/www.irs.gov\/publications\/p544\" target=\"_blank\" rel=\"noopener noreferrer\">IRS Publication 544 \u2014 Sales and Other Dispositions of Assets<\/a><\/li>\n<li><a href=\"https:\/\/www.irs.gov\/newsroom\/like-kind-exchanges-real-estate-tax-tips\" target=\"_blank\" rel=\"noopener noreferrer\">IRS.gov \u2014 Like-Kind Exchanges: Real Estate Tax Tips<\/a><\/li>\n<li><a href=\"https:\/\/www.nar.realtor\/research-and-statistics\" target=\"_blank\" rel=\"noopener noreferrer\">National Association of Realtors \u2014 Research & Statistics<\/a><\/li>\n<li><a href=\"https:\/\/taxfoundation.org\/research\/all\/federal\/like-kind-exchanges-1031\/\" target=\"_blank\" rel=\"noopener noreferrer\">Tax Foundation \u2014 Economic Analysis of Like-Kind Exchange Rules<\/a><\/li>\n<\/ul>\n<\/article>\n<p><br \/>\n<script>\n function toggleFaq(btn) {\n const item = btn.closest('.faq-item');\n const isOpen = item.classList.contains('open');\n \/\/ Close all\n document.querySelectorAll('.faq-item.open').forEach(el => {\n el.classList.remove('open');\n el.querySelector('.faq-question').setAttribute('aria-expanded', 'false');\n });\n \/\/ Open clicked if it was closed\n if (!isOpen) {\n item.classList.add('open');\n btn.setAttribute('aria-expanded', 'true');\n }\n }\n<\/script><br \/>\n<\/body><br \/>\n<\/html><\/p>\n","protected":false},"excerpt":{"rendered":"<p>1031 Exchange Calculator: Tax Deferral Guide (2026) | ArvCalc 1031 Exchange Calculator: How to Calculate Tax Deferral (2026) Updated July 2026 12 min read By ArvCalc Editorial Picture this: you…<\/p>\n","protected":false},"author":0,"featured_media":630,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[18],"tags":[],"class_list":["post-620","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-guides"],"_links":{"self":[{"href":"https:\/\/arvcalc.com\/blog\/wp-json\/wp\/v2\/posts\/620","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/arvcalc.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/arvcalc.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/arvcalc.com\/blog\/wp-json\/wp\/v2\/comments?post=620"}],"version-history":[{"count":1,"href":"https:\/\/arvcalc.com\/blog\/wp-json\/wp\/v2\/posts\/620\/revisions"}],"predecessor-version":[{"id":621,"href":"https:\/\/arvcalc.com\/blog\/wp-json\/wp\/v2\/posts\/620\/revisions\/621"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/arvcalc.com\/blog\/wp-json\/wp\/v2\/media\/630"}],"wp:attachment":[{"href":"https:\/\/arvcalc.com\/blog\/wp-json\/wp\/v2\/media?parent=620"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/arvcalc.com\/blog\/wp-json\/wp\/v2\/categories?post=620"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/arvcalc.com\/blog\/wp-json\/wp\/v2\/tags?post=620"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}