Calculators · Deferral
1031 Exchange Calculator: Tax You Defer and Equity You Keep
Enter the sale price, basis, depreciation, loan and your other income. See the four federal tax layers, your state's share, and how much equity a full 1031 exchange keeps invested.
What this calculator does
Selling a rental is taxed in layers: the depreciation you took comes back at ordinary rates capped at 25%, the rest of the gain is taxed at 0%, 15% or 20% depending on where it lands on your income, the 3.8% net investment income tax applies above fixed thresholds, and your state usually taxes the whole gain. A 1031 exchange defers every layer when all the equity is reinvested and the debt replaced.
This calculator stacks the layers on your other taxable income using the 2026 figures, applies the state rate you enter, and compares the equity you would keep after tax with the equity an exchange keeps working. It is an illustration. Run the result past your CPA, and read how the layers stack for the mechanics.
Tax on the sale, and what an exchange keeps
How the numbers are calculated
Amount realized is price less selling costs. Adjusted basis is basis less depreciation. Realized gain is the difference. The depreciation layer is the smaller of depreciation taken and the gain; it is stacked on your other taxable income (other income less the 2026 standard deduction) and taxed at the ordinary rates in Rev. Proc. 2025-32, capped at 25% under section 1(h)(1)(E).
The remaining gain is stacked above that and taxed at 0% up to $98,900 of taxable income joint ($49,450 single), 15% up to $613,700 joint ($545,500 single), and 20% above. The 3.8% net investment income tax applies to the smaller of the gain and the amount by which other income plus gain exceeds $250,000 joint or $200,000 single. State tax is the gain times the rate you enter.
Equity before tax is amount realized less the loan payoff. Equity after tax subtracts the total tax. A full exchange keeps the before-tax equity invested; the comparison assumes no boot.
Questions about this calculator
Why is the depreciation layer not always 25%?
Unrecaptured section 1250 gain is taxed at your ordinary rates with a 25% ceiling. A couple with modest other income can see part of that layer taxed at 22% or 24%. The calculator stacks the layer on your other taxable income and applies the cap. See recapture not always 25%.
Does the calculator include state tax?
Only through the rate you enter. Most states tax the whole gain at ordinary rates, several withhold at closing, and a few have no income tax. Find your state on the state pages.
What does an exchange defer?
Every federal layer and, in conforming states, the state tax, as long as you reinvest all equity and replace the debt. Boot is taxed. See what boot is.
Where does the 3.8% surtax come from?
The net investment income tax applies to the lesser of your net investment income or the amount your modified adjusted gross income exceeds $200,000 single or $250,000 joint, thresholds that have never been indexed. Gain deferred under section 1031 is left out of net investment income.
Is my basis the price I paid?
Basis is price plus capital improvements minus depreciation allowed or allowable, whether or not you claimed it. See calculating adjusted basis.
Sources
Figures checked on September 30, 2026. Rates and thresholds change each year; this page is general information, not tax or legal advice.
- Rev. Proc. 2025-32, 2026 inflation adjustments (brackets, capital gain breakpoints, standard deduction)
- Internal Revenue Code section 1(h), capital gain rates and the 25% unrecaptured section 1250 ceiling
- Internal Revenue Code section 1411, net investment income tax
- IRS Topic 409, Capital Gains and Losses
- IRS Publication 544, Sales and Other Dispositions of Assets
- Internal Revenue Code section 1031
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