1031 Exchange Calculator

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Key Terms

The amount the seller of the property receives after all selling expenses, including real estate commissions, closing costs, legal fees, and outstanding loans.

Any permanent addition or alteration to real property that has been capitalized for tax purposes and substantially adds value or prolongs the useful life of the real property.

The total capital an owner has invested and capitalized in the asset, including the purchase price, closing costs, and capitalized improvements.

The total depreciation for an investment property that has been charged or was available to use as depreciation expense during the time the property was owned.

The profits made from selling an investment property calculated by subtracting original tax basis from net sales proceeds

IRS tax applied on the long-term capital gains of an investment property when the property is sold. The long-term capital gains tax rates are 0%, 15%, and 20%, depending on your income including the gain resulting from the sale.

State tax applied on long-term capital gains of an investment property and depreciation recapture when the property is sold. The state capital gains tax rates range from 0% to 13.3%, depending on your income and the state the property is located.

Federal tax assessed on the portion of the capital gain attributable to the depreciation deductions previously allowed during the period the taxpayer owned the property. The Federal depreciation recapture rate on this portion of the gain is 25%.

IRS surtax applied to the portion of modified adjusted gross income (MAGI) above predetermined thresholds. If applicable, the net investment income tax (NII) is 3.8%, depending upon your income.

Annual rate of return on a real estate investment calculated by dividing annual income from property by total equity investment in property

How to Use the 1031 Exchange Calculator

Calculate capital gains tax & total tax liability

Investment property owners can pay as much as 42.1% in taxes related to the sale of their property. This tax liability is comprised of Federal Capital Gains Tax (0%, 15%, 20%), State Capital Gains Tax (0% to13.3%), Depreciation Recapture Tax (25%), and Net Investment Income Tax (0% or 3.8%). The aggregate amount of these calculations represents the maximum taxes owed and can be deferred with a 1031 Exchange. Note that when considering a property that was acquired via a 1031 Exchange, all deferred gain must be included within the inputs for an estimate of the total tax liability.

Compare net sales proceeds available for reinvestment

The taxes deferred on the relinquished property (investment property sold) allow for greater net sales proceeds to be reinvested. Use the 1031 Exchange Calculator to estimate net sales available for reinvestment with and without a 1031 Exchange.

About The 1031 Exchange Calculator

The 1031 Exchange Calculator above provides a simple estimation of potential taxes related to the sale of investment property and net sales proceeds available for reinvestment. These calculations are estimates for the purpose of demonstration. Many factors are involved in calculating taxes, including factors unique to each taxpayer. As actual results may vary, please consult your tax and legal advisors for a thorough tax calculation. 

Disclaimer

Calculator is for illustration purposes only and does not constitute legal or tax advice. Individual results will vary. It is important to consult with a qualified tax or legal professional before making any significant investment decisions. The estimated taxes in the 1031 Exchange Calculator are based on current federal and state rates as well as the following assumptions: (1) the property you are selling is not your primary residence or your vacation home; (2) you have owned the property for at least one year; (3) tax projections are based on the marginal tax rate (highest rate) vs. effective tax rate (average rate).

Download FREE Guide

1031 Exchange Basics

FREE 1031 Guide
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