1031 Exchange Calculator, and What It Actually Costs You
See what a 1031 exchange defers on your sale. Then see the part no one mentions: you stay a landlord, holding until death or another exchange. Compare it, dollar for dollar, against a §453 structured installment sale that pays you hands-off.
What is the tax bill on your property sale going to be?
Send me the sale price and rough basis. Within one business day I'll email you the actual number and the Seller's Guide to §453. If it doesn't fit your deal, I'll tell you that plainly.
No retainer · no obligation. Hans Goldstein, a licensed insurance agent (CA Insurance License #4273294), will contact you and may discuss insurance products, including annuities.
Illustrative only, not tax advice. Bring the numbers to your CPA, or send them the §453 guide built for accountants.
Find out what your sale is really going to cost you in tax, and what you can do about it
No retainer. On a funded structure, the insurer pays a one-time commission of about 4% of the amount structured to the brokerage firm that places it (Hans’s share is about 2.4%; no trail). It is built into the annuity pricing, not a separate fee.
Find out what your tax bill actually looks like before you sell, including the parts your CPA may not raise until the return is already being prepared.
Most people find out what they owe after the sale closes, when nothing can be changed. A short conversation now tells you the number, which layers apply to your situation, and which options are still open while the sale is still in front of you.
- What you will actually owe: federal, the 3.8% surtax, recapture and your state
- Which of those layers you can still do something about
- Whether spreading the sale changes the number in your case
Hans Goldstein · 213-414-2808 · Hans Goldstein: Tax & Exit Planning · This is an educational conversation, not tax advice. Bring your CPA in before you file.
Hans Goldstein, a licensed insurance agent (CA Insurance License #4273294), will contact you and may discuss insurance products, including annuities.
The part a 1031 calculator never shows you: your boot
An exchange defers gain only to the extent you traded real property for real property. Anything else you walked away with (cash you did not reinvest, or debt you shed without replacing) is boot, and it is taxable this year. Debt relief is the one that catches people: it is taxable income with no cash attached.
New to this? Read 1031 exchange boot: every way it bites, and what actually fixes it first. It explains each number below: the netting rule that only works one way, why recapture comes off the front, and why an installment note usually cannot help.
What you're selling, and what you're buying
Boot is the part of your exchange that doesn't defer. It comes from two places: cash you don't reinvest, and debt you shed without replacing. Both are below.
How your depreciation was taken
This decides the character of the boot, which decides whether a note can help. Straight-line on the building is §1250, taxed at up to 25%, and it can be spread. Anything a cost segregation study moved into 5-, 7- or 15-year property is §1245, which is ordinary income, and §453(i) puts all of it in year one no matter what you do.
Your tax picture
Boot stacks on top of everything else you earn that year. That's why the same boot costs two sellers different amounts.
What you can still do about it
Every one of these has to be in place before the intermediary wires the money. After closing there is no amending your way out.
Two structures, side by side
What has to come out now, and what can ride the note
Two layers of a boot can never be spread however the deal is papered: §1245 cost-seg recapture, which §453(i) puts in the year of sale, and mortgage boot, meaning debt paid off or assumed at closing and not replaced, which is consideration you are treated as receiving with no cash behind it (§1031(d); Reg. §1.1031(d)-2). Everything below those two can ride the note.
What the boot is made of
Recapture comes off the front. Only the layers below it can ever be spread.
The phantom bill
Tax you owe versus cash you actually received.
What the fixes do
Your actual deadline
Your 45-day identification
The deduction you thought you were buying
Reg. §1.168(i)-6: carryover basis keeps depreciating on the OLD schedule. Only new money gets a fresh clock.
Is the note's rate high enough for the IRS?
A below-market coupon is not cheap money for the buyer. §1274(c)(2) reprices the note: part of what the contract calls principal becomes interest, which is ordinary income, not 25% or 0/15/20% gain. This is the first thing a qualified intermediary will ask about.
Why the note gets sized at $5.0M
§453A(c) charges interest on the tax you have not paid yet, but only on the share of the note above $5,000,000. It is not a penalty and not a tax on the gain; it is rent on the deferral, billed every year the note is outstanding.
What happens if you borrow against the note
§453A(d)(1) treats the net proceeds of any borrowing secured by an installment obligation as a payment received on that obligation. The gain comes due the day the note is pledged, and unlike the interest charge above, this rule has no $5,000,000 threshold.
The two-year trap on a related buyer
§453(e)(1): if the person who bought from you is related and resells before you have been paid out, what they receive is treated as received by you. For two years your deferral is contingent on somebody else's decision.
Both sides, year by year
Paying the tax on day one permanently shrinks the principal at work. Both routes are taxed identically. The only difference is timing. The chart runs the two of them side by side; below it, each is stated as the pre-tax rate a CD would have to pay to match it.
Take it as cash, or take it as a note
Same boot, two ways to receive it.
Basis of calculation
What this was run on
Authority relied on
Boot is computed under the netting rules: cash you add and exchange costs offset mortgage boot dollar for dollar, but new debt on the replacement never offsets cash you received. Recognised gain is the lesser of your realised gain and net boot, and it fills the expensive buckets first: §1245 recapture, then unrecaptured §1250 at 25%, then 0/15/20%. Full walk-through, with worked examples of each fix: 1031 exchange boot.
Frequently asked
Q: What does a 1031 exchange actually defer? A: Gain, not tax, and only to the extent you traded real property for real property. Anything else you walked away with (cash you did not reinvest, or debt you shed without replacing) is boot, and it is taxable this year. The part that does defer rides into the replacement as a lower basis: replacement price minus deferred gain (IRC §1031(d)). The gain is still there, sitting under the next sale.
Q: How long do I actually have? A: 45 days to identify, and 180 days to receive the replacement. But the 180 days is really the earlier of 180 days or the due date of that year's return including extensions (Treas. Reg. §1.1031(k)-1(b)(2)). A sale late in the year gets the window guillotined at April 15 unless a Form 4868 extension is filed. That is the most common way a clean exchange dies on the calendar, and it is a date, not a judgment call.
Q: How is a §453 structured installment sale different? A: A 1031 keeps you in real estate. You stay a landlord until you exchange again or die. A §453 installment sale does not. You sell, and the gain is reported as you are paid rather than all at once, so each year's slice is priced in its own brackets. No replacement property, no 45/180-day clock, no tenants. This page prices both on your numbers.
Q: Can I do a partial exchange and put a note on the boot? A: Yes. An installment obligation received in a deferred exchange is still boot; §453 only decides when the gain on it is reported (Treas. Reg. §1.1031(k)-1(j)(2)). So the exchange defers the like-kind piece and the note spreads the capital layers of what it did not. Recapture is still recognized in full in the year of sale under §453(i). A note cannot spread that, and any pitch that says otherwise is selling you the wrong year.
Q: Do my suspended passive losses free up? A: Not on an exchange. §469(g)(1) frees the whole suspended loss only on a fully taxable disposition, and a §1031 exchange is not one. The losses carry over and attach to the replacement property. A taxable sale does free them, and under the installment method §469(g)(3) frees them in step with the gain recognized each year.
Q: Does the calculator assume a state? A: This page starts on California and takes every rate straight from the engine's tax tables, covering 40 states. The intermediary version at 1031 boot calculator forces you to pick one instead, because a rate assumed is a rate wrong everywhere else. If you are leaving California, note the clawback: R&TC §18032 keeps CA's claim on gain deferred into out-of-state property.
Run your specific numbers
The calculator runs your sale through real 2026 federal + state tax brackets and shows §453 savings vs lump sum side-by-side.
Run the calculator → 213-414-2808