Transparent method
The formula
Worked example
Example inputs
How to interpret the result
Any boot received in a 1031 exchange, cash or debt relief not offset by new debt, is taxable in the year of the exchange even though the exchange as a whole is otherwise tax-deferred, so a transaction can be structured correctly overall and still trigger a real, immediate tax bill on the specific boot portion.
Before you rely on it
What to check
Work with a qualified intermediary and tax professional to structure the specific transaction, since boot calculations depend on transaction details a general estimate can't fully capture.
The common error
Where people go wrong with 1031 exchange boot calculator
Assuming a 1031 exchange defers all tax on the transaction entirely. Any boot received, whether cash or unreplaced debt, is taxable in the year of the exchange even while the rest of the transaction defers tax as intended.
Sensitivity evidence
How relinquished property sale price changes the estimated taxable boot
| Relinquished property sale price | Estimated taxable boot | Estimated realized gain | Replacement equity invested |
|---|---|---|---|
| $560,000 | $0.00 | $160,000 | $450,000 |
| $630,000 | $0.00 | $230,000 | $450,000 |
| $700,000worked example | $0.00 | $300,000 | $450,000 |
| $770,000 | $70,000 | $370,000 | $450,000 |
| $840,000 | $140,000 | $440,000 | $450,000 |
Every input, tested
Which input moves the estimated taxable boot most
| Input | Tested from | To | Estimated taxable boot at each end | Swing |
|---|---|---|---|---|
| Relinquished property sale price | $630,000 | $770,000 | $0.00 to $70,000 | $70,000 |
| Debt relieved | $225,000 | $275,000 | $25,000 to $0.00 | $25,000 |
| Replacement property price | $675,000 | $825,000 | $75,000 to $0.00 | $75,000 |
| Replacement debt | $270,000 | $330,000 | $0.00 to $30,000 | $30,000 |
| Adjusted basis and selling costs | $360,000 | $440,000 | $0.00 to $0.00 | none |
Two variables at once
Estimated taxable boot by relinquished property sale price and replacement debt
| Relinquished property sale price \ Replacement debt | $240,000 | $300,000 | $360,000 |
|---|---|---|---|
| $560,000 | $0.00 | $0.00 | $0.00 |
| $630,000 | $0.00 | $0.00 | $0.00 |
| $700,000 | $0.00 | $0.00 | $60,000 |
| $770,000 | $10,000 | $70,000 | $130,000 |
| $840,000 | $80,000 | $140,000 | $200,000 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Relinquished property sale price | $700,000 |
| Adjusted basis and selling costs | $400,000 |
| Debt relieved | $250,000 |
| Replacement property price | $750,000 |
| Replacement debt | $300,000 |
| Estimated taxable boot | $0.00 |
| Estimated realized gain | $300,000 |
| Replacement equity invested | $450,000 |
Where the inputs come from
Relinquished property sale price is what you sold for, adjusted basis and selling costs are your remaining cost basis plus the costs of selling, debt relieved is the mortgage paid off at sale, replacement property price is what you buy next, and replacement debt is the new loan. Cash you receive or debt you no longer carry is taxable boot. To qualify, the exchange must go through a qualified intermediary, and you have 45 days to identify a replacement and 180 days to close.
Using the estimated taxable boot in a real decision
To defer everything, buy equal or higher value, use all the equity and replace the debt or add cash. Any shortfall is taxable up to the gain.
When the result stops applying
The rules are strict and unforgiving: missing a deadline or touching the sale proceeds disqualifies the exchange. Only real property held for investment or business use qualifies, and since 2018 the rule does not apply to personal property. State rules vary. Depreciation recapture is deferred too, but it comes due when you eventually sell without exchanging. Use an experienced intermediary.
What to compare it with
See the tax you would pay without an exchange on the capital gains calculator, and the depreciation effects on the rental property depreciation page. The rental property ROI calculator compares candidates. A tax advisor and a qualified intermediary should be in place before you sell.
People also ask
Frequently asked questions
What is boot in a 1031 exchange?
Cash or other non-like-kind property you receive, or debt relief not offset by new debt, which is taxable up to your gain.
What are the 1031 exchange deadlines?
You must identify replacement properties within 45 days of the sale and close within 180 days, and the deadlines cannot be extended.
Can I use a 1031 exchange on my home?
No. It applies only to real property held for investment or business, though a home sale has its own exclusion for gains.