Like Kind Exchange 1031 Deferral Calculator

Purpose and model boundary

This calculator compares two ways of disposing of an investment property in tax year 2025 or 2026. Selling it outright taxes the whole gain this year. Exchanging it for like-kind real property under section 1031 taxes only the gain recognised now, which is the gain up to the boot you receive, and defers the rest. The main result is the tax the exchange defers: the tax of the outright sale less the tax due now with the exchange.

You enter one property you give up and one replacement. For the property you give up, that is its sale price, the selling costs, its adjusted basis and the depreciation taken on it. For the replacement, it is the price and any cash or other property you receive and keep (the boot). Then you enter your tax year, filing status, other income and, optionally, your deductions and a state rate.

The workbook works out the gain, the part of it that is unrecaptured section 1250 gain and the gain recognised in the exchange. It then runs the federal tax calculation three times for your year and filing status: selling outright, exchanging, and with neither. Each column's tax is its difference from the column with neither. It also gives the basis the replacement property takes.

The tax is deferred, not forgiven. The deferred gain stays in the replacement property as a lower basis, and a later taxable sale of the replacement can bring it back.

For the tax on sales of stocks, funds and other investments, use the Capital Gains Tax on Investment Sales Calculator. For the yearly cash flow and return of a rental property, use the Rental Property Cash Flow Return Calculator.

Every figure on this page is computed by the spreadsheet; the page adds nothing to it. The model is educational. It does not check whether an exchange qualifies under section 1031, it is not a tax return, and it is not financial, investment, tax or legal advice.

Inputs and units

• The property you give up:
  • its sale price, before selling costs;
  • the selling costs: commissions, fees and closing costs (0 if none);
  • its adjusted basis: what you paid plus improvements, less the depreciation you have taken;
  • the depreciation taken on it (0 if it was never depreciated). It is already out of the adjusted basis; here it decides how much of the gain is unrecaptured section 1250 gain.
• The replacement:
  • its price;
  • the boot: cash or other property you receive in the exchange and keep, after the selling costs paid from the proceeds. Enter 0 if you reinvest everything.
• Tax year: 2025 or 2026.
• Filing status: single, married filing jointly, married filing separately or head of household. A qualifying surviving spouse uses married filing jointly, which has the same figures here.
• Other income for the year, before deductions: wages, interest, retirement income and the like, without this sale. It is treated as ordinary income, and the gain is stacked on top of it.
• Your deductions, optional. Leave it blank to use the standard deduction for the tax year and filing status.
• State tax rate on the gain, optional. Leave it blank for no state tax. One flat rate stands for your state's rules, and whether your state follows the federal deferral is not checked.

Every dollar amount is in whole US dollars, from 0 to 1 trillion dollars. A fraction of a dollar is refused, never rounded. The state rate is a percentage from 0% to 20%.

The additional amount you pay for the replacement is not entered. The workbook works it out from the prices as the replacement price less the proceeds you reinvest, which are the amount realised less the boot. It is paid in cash or new borrowing.

Governing relationships

The amount realised is the sale price less the selling costs. The gain is the amount realised less the adjusted basis:

gain = sale price − selling costs − adjusted basis

The unrecaptured section 1250 gain is the lesser of the gain and the depreciation taken. The rest of the gain is other long-term gain.

In the exchange:

• the gain recognised is the lesser of the gain and the boot, and never below 0;
• the gain recognised counts as unrecaptured section 1250 gain first, and only the part beyond it counts as other long-term gain;
• the deferred gain is the gain less the gain recognised;
• the additional amount paid is the replacement price less the proceeds you reinvest (the amount realised less the boot).

The replacement property's basis follows Form 8824, line 25:

new basis = adjusted basis + additional amount paid + gain recognised − boot

When there is a gain, this equals the replacement price less the deferred gain. An exchange recognises no loss. When the amount realised (the sale price less the selling costs) is no more than the adjusted basis, there is no gain to defer and every tax reads 0. The same formula then gives the basis: the replacement price plus any loss, not the replacement price less a deferred gain. The tax if you sold outright also reads 0 for a loss: it leaves out any tax effect of selling outright at a loss, which this calculator does not model.

The federal tax in each column follows the order of the Schedule D Tax Worksheet:

• taxable income is your other income plus the gain included, less the deduction, and never below 0;
• the deduction is used against ordinary income first, then against the unrecaptured section 1250 gain, then against the other long-term gain;
• the unrecaptured section 1250 gain sits on top of the ordinary taxable income and is taxed at the ordinary rate of each layer it crosses, but never above 25%;
• the other long-term gain sits above it and is taxed at 0%, 15% and 20% by the year's breakpoints for your filing status;
• any part of the unrecaptured section 1250 gain taxed at 25% uses none of the 15% band;
• the ordinary part is taxed at the year's rate schedule;
• the tax is the smaller of that sum and the regular tax on all taxable income.

The column with neither the sale nor the exchange is your year without the gain. The tax on the unrecaptured section 1250 gain and the tax on the other long-term gain in each column are what that gain adds to it.

The net investment income tax is 3.8% of the smaller of the gain included and the amount by which adjusted gross income exceeds the threshold for your filing status. Your other income is treated as non-investment income here, so only the gain counts as net investment income. The state tax is your state rate times the gain included.

tax deferred = tax if you sold outright − tax due now with the exchange

Each of those taxes is the federal income tax plus the net investment income tax plus the state tax that the gain adds to your year.

The figures each tax year uses are kept in the workbook by year, each with its source and the date it was read:

Calculation sequence

The spreadsheet first checks the inputs. It then computes:

1. the amount realised, the gain and its unrecaptured section 1250 part;
2. the gain recognised in the exchange, its unrecaptured section 1250 part, the deferred gain and the additional amount paid;
3. the deduction for the year and filing status;
4. the federal tax calculation for the chosen year and filing status in three columns: selling outright, exchanging and with neither;
5. for selling outright and for exchanging, the tax on the unrecaptured section 1250 gain, the tax on the other long-term gain, the net investment income tax and the state tax;
6. the tax if you sold outright, the tax due now, the tax deferred and the basis of the replacement.

A block of consistency checks then confirms the arithmetic, including that the new basis equals the replacement price less the gain plus the gain recognised (the replacement price less the deferred gain when there is a gain), before the status is returned.

Outputs and interpretation

The headline is the tax deferred by exchanging. The cards show:

• the tax due now with the exchange;
• the tax if you sold outright;
• the gain on the property you give up;
• the gain recognised in the exchange;
• the gain deferred into the replacement;
• the basis of the replacement property;
• the additional amount paid for the replacement.

The table shows each part of the tax, selling outright and exchanging, and the difference the exchange defers: the tax on unrecaptured section 1250 gain, the tax on the other long-term gain, the net investment income tax, the state tax and the total.

The following are returned to the API and MCP, not shown as cards:

• each of the four parts of the tax, selling outright and exchanging;
• the workbook's self-check.

Under the default inputs, a married couple filing jointly in 2026 has 120,000 dollars of other income and takes the standard deduction of 32,200. They sell a rental for 800,000 dollars with 40,000 of selling costs, an adjusted basis of 350,000 and 150,000 of depreciation taken. The replacement costs 900,000, and they receive 20,000 dollars of cash. There is no state tax.

The gain is 410,000 dollars: 150,000 of unrecaptured section 1250 gain and 260,000 of other long-term gain.

• Selling outright, the section 1250 gain sits from 87,800 to 237,800 of taxable income at 12%, 22% and 24%, which is 32,228 dollars. The other 260,000 sits above it, all in the 15% band, which is 39,000. The net investment income tax is 10,640. The tax if you sold outright is 81,868 dollars.
• Exchanging, the gain recognised is the 20,000 of boot, all of it unrecaptured section 1250 gain, at 12% and 22%: 3,100 dollars. Income stays below the net investment income tax threshold.

The tax deferred is 78,768 dollars. The deferred gain is 390,000, and the replacement's basis is 510,000, the 900,000 price less the 390,000 deferred.

The examples change one thing at a time from that exchange, with a 5% state rate:

• With the state rate, selling outright would cost 102,368 dollars and the exchange 4,100 now, so 98,268 is deferred.
• With no boot, no gain is recognised and the whole 102,368 is deferred, into a basis of 490,000.
• With 200,000 dollars of boot, the gain recognised covers all 150,000 of section 1250 gain and 50,000 of other gain. Then 52,388 of tax is due now and 49,980 is deferred.

The first chart shows, for each part of the tax, the grey bar of the outright sale beside the blue bar of the exchange. The gap between each pair is the tax deferred. The second chart steps from the old basis to the basis of the replacement. Each bar starts at zero and is one figure from the calculation: the old basis, the additional amount paid, the gain recognised, the boot received as a red bar below zero, and the new basis.

Validation and status logic

The workbook evaluates the conditions below from top to bottom and returns the first matching status.

NOT VALID is a refusal, not a numeric answer: every number reads zero and the table is empty. CHECK accompanies a computed result but calls for the stated review. The self-check is reported separately as arithmetic-integrity evidence; it does not replace this ordered status chain.

Assumptions and limitations

The calculator does not check whether an exchange qualifies. Under section 1031 that needs, among other things:

• real property held for use in a trade or business or for investment, exchanged for real property of a like kind held the same way, and not property held mainly for sale;
• the replacement identified within 45 days after you transfer the property you give up, and received within 180 days, or by the due date of your return with extensions if that is earlier;
• no exchange of property in the United States for property outside it;
• special rules for exchanges between related parties.

Confirm these for your exchange.

The boot is what you receive and keep after the selling costs paid from the proceeds, as Form 8824, line 15, counts it. If you paid the selling costs out of pocket, enter the boot net of them, or the gain recognised will be overstated. Under the rules, a mortgage or other liability the other party takes over in the exchange also counts as boot. This calculator does not model liabilities, so an exchange with one can recognise more gain than shown here.

The gain recognised is counted as unrecaptured section 1250 gain first. This follows from the definition in 26 U.S.C. 1(h)(6) and the limit in 26 U.S.C. 1250(d)(4). No IRS form or publication states this order for exchanges in so many words, so treat that split of the tax due now as an estimate.

All the gain up to the depreciation taken is treated as unrecaptured section 1250 gain, taxed at up to 25%. None of it is treated as ordinary income under section 1250's own recapture of depreciation beyond the straight-line amount. Section 1245 recapture on personal property that goes with the real property is not modelled either.

The gain is treated as long-term, so a property held one year or less is outside the model. The netting of section 1231 gains and losses and its five-year lookback is not modelled.

The ordinary tax uses the exact federal rate schedules. A return with less than 100,000 dollars of taxable income uses the IRS Tax Table, which taxes 50-dollar bands at their midpoint, so a filed return can differ by a few dollars.

The model also leaves out:

• the depreciation of the replacement property and any later sale of it;
• qualified dividends and other investment income;
• a capital loss carried in from an earlier year;
• the alternative minimum tax;
• the additional standard deduction for age or blindness and limits on itemized deductions;
• state brackets, deductions and credits, local taxes, and whether your state follows the federal deferral.

The state tax is one flat rate on the gain included.

Restrictions and non-computing states

This calculator enforces its numeric and choice limits before it accepts a result. The tax year and filing status come from their lists. The workbook refuses:

• a dollar amount that is not whole dollars or is above 1 trillion dollars;
• boot above the amount realised;
• a replacement that costs less than the proceeds you reinvest (enter the difference as boot).

Blank deductions mean the standard deduction, and a blank state rate means no state tax.

Errors and warnings

A request rejected by the page's input limits is not a computed result. A transport or service failure cannot establish a fresh workbook answer. Review the workbook's References and Disclaimer and current tax rules with a qualified professional before using a result for a real decision.

Sources and further reading

The property, the replacement, your income, deductions and state rate come from the inputs. The federal figures for each tax year and the section 1250 rate come from the sources below. They are kept in the workbook by year, with the date each was read, and the workbook's References sheet identifies them. The links explain the rules the model follows; they do not endorse this calculator.

• 26 U.S. Code § 1031, Exchange of real property held for productive use or investment (Legal Information Institute). Subsection (a) gives the general rule of no gain or loss on an exchange of like-kind real property held for use in a trade or business or for investment, not for property held mainly for sale, and the 45-day identification and 180-day receipt periods. Subsection (b) recognises gain up to the money and other property received, (c) recognises no loss, (d) sets the basis of the property received, (f) covers related persons and (h) says that real property in and outside the United States are not of a like kind (retrieved 2026-10-24).
• Instructions for Form 8824 (2025), Part III, lines 15 to 25. Line 15 is the money and other property received, reduced by exchange expenses. Line 20 makes the gain recognised the smaller of that and the realised gain, but not less than zero, and line 25 gives the basis of the like-kind property received. The instructions also say that a loss isn't recognised and that the replacement must be identified within 45 days (retrieved 2026-10-17).
• IRS Publication 544 (2025), chapter 1, "Like-Kind Exchanges", covers the same rules: gain recognised to the extent of the money and other property received, the basis of the property received, and the identification and receipt periods of a deferred exchange. Chapter 3 explains section 1250 property and the limit on section 1250 gain in a like-kind exchange (retrieved 2026-10-17).
• 26 U.S. Code § 1250, Gain from dispositions of certain depreciable realty, subsection (d)(4), caps the section 1250 gain taken into account in a like-kind exchange at the greater of two amounts, the first of which is the gain recognised on the disposition (retrieved 2026-10-17).
• 26 U.S. Code § 1, subsection (h)(1)(A), (C) and (E), sets the order of the rates on net capital gain, with unrecaptured section 1250 gain at up to 25%. Subsection (h)(6)(A) defines unrecaptured section 1250 gain (retrieved 2026-10-17).
• Instructions for Schedule D (Form 1040) (2025), Schedule D Tax Worksheet, lines 18 to 21, 28 to 31, 33 and 34, 35 to 40 and 44 to 47. They measure the 15% room from line 21, so unrecaptured section 1250 gain taxed at 25% uses none of it. They also take the deduction against the unrecaptured section 1250 gain before the other long-term gain (retrieved 2026-10-17).
• Revenue Procedure 2024-40, section 2.01 and section 2.03 (in its section 2, "2025 Adjusted Items": "Tax Rate Tables" and "Maximum Capital Gains Rate"), gives the tax year 2025 rate schedules and the 0% and 15% long-term breakpoints for each filing status (retrieved 2026-10-15).
• Revenue Procedure 2025-32, section 4.01, section 4.03 and section 4.14(1) (in its section 4, "2026 Adjusted Items": "Tax Rate Tables", "Maximum Capital Gains Rate" and "Standard Deduction", "In general"), gives the tax year 2026 rate schedules, long-term breakpoints and standard deductions. Its section 3.01 ("Removal of Section 2.15(1) of Rev. Proc. 2024-40") gives the tax year 2025 standard deductions as amended by Public Law 119-21, which replace those in section 2.15(1) of Revenue Procedure 2024-40; section 2.08 describes the change (retrieved 2026-10-15).
• IRS Topic 409, Capital gains and losses, explains the 0%, 15% and 20% rates on long-term gains and the maximum 25% rate on the part of a gain from selling section 1250 real property that is unrecaptured section 1250 gain (retrieved 2026-10-15).
• IRS Questions and Answers on the Net Investment Income Tax gives the 3.8% rate, the thresholds for each filing status and that they are not indexed for inflation (retrieved 2026-10-15).
• Microsoft Support's SUMPRODUCT documentation describes the summing function the workbook uses for the tax of each rate layer.

This is an educational estimate, not financial, investment, tax or legal advice. A like-kind exchange has strict rules and deadlines that this calculator does not check, tax rules and figures change every year, and the result depends on your whole return. Check your exchange against current IRS guidance and with a qualified professional before you sell, exchange or file.