How to use it
What each input means
Closing & Transaction Costs covers two buckets: direct costs of selling or buying (commissions, title, escrow, legal, transfer taxes, recording) and direct costs of the exchange (qualified intermediary fees and any other party facilitating the 1031).
Adjusted Cost Basis is the original purchase price of the relinquished property adjusted for capital improvements and accumulated depreciation. Your CPA or the depreciation schedule on the property is the authoritative source.
Reading the results
Deferred gain, taxable gain, and boot
Potential Gain on Sale is the realized capital gain on the relinquished property: sale price, net of transaction costs, less the adjusted basis. This is the full gain in play before the 1031 rules apply.
Deferred Gain is the portion of that gain covered by the exchange. It does not disappear: it carries forward into the basis of the replacement property and is taxed if and when you eventually sell outside of a 1031.
Taxable Gains Remaining is gain that does not qualify for deferral and is taxable this year. It comes from two sources. Cash boot occurs when cash leaves the qualified intermediary, either pulled out intentionally or left unspent at close. Mortgage boot occurs when the replacement debt is lower than the relinquished debt and that gap is not offset by additional out-of-pocket cash.
The general planning rule: to fully defer, the replacement property's purchase price and debt should both be equal to or greater than the relinquished property's sale price and debt. That is what "equal or up" means.
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Frequently asked questions
Q1What is "boot" in a 1031 exchange?
Boot is any value received in an exchange that is not like-kind real estate. Two common types: cash boot (cash pulled out of the qualified intermediary or unspent at close) and mortgage boot (debt on the relinquished property that is not replaced with equal or greater debt on the replacement). Boot is taxable in the year of the exchange.
Q2Why does loan balance affect my taxable gain?
The IRS treats a reduction in debt as if you received cash. If you pay off a $1M mortgage and take a new $600k mortgage on the replacement, the $400k debt reduction is mortgage boot unless you offset it with additional out-of-pocket cash invested in the replacement.
Q3Does this account for state taxes or depreciation recapture?
The "estimated federal tax deferred" line uses long-term capital gains (20%) plus the Net Investment Income Tax (3.8%), illustrative of a top-bracket taxpayer. It does not account for your actual federal bracket, state income tax, or §1250 depreciation recapture, which is taxed at up to 25% and can change the result materially. Use this for planning, then run the actual tax math with your CPA.
This calculator is for planning, not tax advice. Confirm any 1031 scenario with a CPA before close.