1031 Exchange Retirement Calculator

The sale estimate starts with your current property value, subtracts the selling-cost percentage, and compares that amount with your adjusted basis. Adjusted basis is the original purchase price plus capital improvements minus the depreciation amount you enter. The calculator does not derive depreciation from years owned; that field does not change the result.

Adjusted basis = purchase price + improvements − depreciation entered
Estimated gain = property value × (1 − selling-cost rate) − adjusted basis
Capital-gain portion = max(0, estimated gain − depreciation entered)
Estimated sale tax = capital-gain portion × capital-gains rate
                   + depreciation entered × depreciation rate
                   + max(0, estimated gain) × state-tax rate
                   + max(0, estimated gain) × NIIT rate
Net sale proceeds = property value − selling costs − estimated sale tax − mortgage balance
Exchange equity = property value − exchange costs − mortgage balance

The “Tax Deferred” figure equals the estimated tax if sold. It assumes the exchange qualifies for full deferral; the tool does not calculate taxable cash or debt relief (“boot”). Its “Exchange Equity” is an estimate after the entered exchange-cost percentage and existing mortgage payoff. It does not calculate the cash or new financing needed to purchase the replacement property.

For example, with the default $500,000 property value, $300,000 purchase price, $25,000 improvements, $60,000 depreciation, 6% selling costs, and no mortgage, adjusted basis is $265,000 and estimated gain is $205,000. At the default tax rates, the tool estimates $54,790 of sale tax, $415,210 of net sale proceeds, and $490,000 of exchange equity. Those are model outputs, not a tax return calculation.

The sell path starts with estimated after-tax sale proceeds. Each year it grows that balance by the “Annual Appreciation” input and adds the current property's annual rental income minus annual operating expenses. This input acts as the sell path's growth rate, even though its label describes property appreciation. The tool keeps adding that former property's net rent after the modeled sale; it is a comparison assumption, not income you would still receive from a sold property. The added income is kept as a separate cumulative amount; it does not itself compound.

The exchange path starts with the full replacement property value, grows it by “Expected Appreciation,” and adds estimated rent equal to replacement value × “Rental Yield” × 60% each year. The 60% factor is a fixed expense assumption. The tool does not use your current property's expense ratio for the replacement property. Rental income is accumulated separately and does not compound.

The chart, table, “Wealth Advantage,” and benefit score compare those two modeled totals. They do not subtract a replacement mortgage or exchange costs from the replacement property's starting value. A larger or financed replacement property can therefore make the exchange path look much better even when the investor's equity is much smaller. The model also omits future sale taxes, new financing costs, debt service, vacancies, capital repairs, changes in rent, income taxes on annual returns, and reinvestment of cash flow. The inflation and mortgage-rate inputs do not affect the calculation. Treat the score as a visual summary of these model outputs, not a measure of whether an exchange is suitable for you.

For a separate estimate of ongoing property cash flow, use the rental income retirement calculator. If you plan to spend the sale proceeds instead, the retirement income calculator can place that cash alongside other income sources.

The tax fields are user-supplied flat rates, not automatically selected 2026 brackets. The calculator applies the entered NIIT rate to the entire positive estimated gain. In reality, the 3.8% net investment income tax generally applies to the lesser of net investment income or modified adjusted gross income above the filing-status threshold; it may be zero for you. The IRS lists thresholds of $200,000 for single or head-of-household filers, $250,000 for joint filers, and $125,000 for married filing separately. Set this field to zero when NIIT does not apply, and confirm the amount with your tax adviser. IRS: Net Investment Income Tax

The calculator labels its depreciation line “Depreciation Recapture” and multiplies all entered depreciation by your chosen rate, even if the estimated sale gain is smaller. For many depreciated buildings, the relevant federal category is unrecaptured Section 1250 gain, taxed at a maximum 25% rate, limited by the applicable gain and affected by other tax facts. Depreciation generally reduces basis when it was allowed or allowable, even if you did not claim it. This tool does not make those distinctions, so its tax total can be materially high or low. IRS: Capital gains and losses · IRS: Basis and depreciation

The state-tax field applies one rate to the entire positive gain; it does not account for state-specific rules, deductions, or credits. For a separate sale-tax scenario, try the capital gains tax in retirement calculator, then use a property-specific tax projection from a qualified professional for an actual transaction.

Section 1031 generally applies to real property held for investment or business use that is exchanged for other qualifying real property. A personal residence does not qualify, and property held primarily for sale is excluded. An exchange usually defers gain rather than erasing it: your replacement property's basis generally carries over, with adjustments for cash, liabilities, costs, and any recognized gain. IRS Publication 544: Like-kind exchanges · IRS Publication 551: Basis of assets

In a deferred exchange, identify replacement property in writing within 45 days after transferring the relinquished property. Receive it by the earlier of 180 days after that transfer or your tax-return due date including extensions. These periods run concurrently. A qualified intermediary is commonly used so you do not receive or control the sale proceeds. Your transaction documents, ownership, and any cash or debt relief matter; this calculator does not test them. IRS Form 8824 instructions

Buying a lower-value replacement property or retaining cash can create taxable boot, but the taxable amount is not simply every dollar of the price difference. Debt relief and other property received can also matter, and recognized gain is generally limited by the gain realized. Ask your exchange adviser to model boot and financing before closing. IRS Publication 544: Partially nontaxable exchanges