1031 Exchange Replacement Property Calculator
Enter your sale terms. This calculator shows the minimum replacement property value, equity, and debt required to fully defer tax — then displays a scenario comparison so you can see exactly what the exchange costs if you keep different amounts of cash.
The three replacement property requirements
A 1031 exchange defers gain only on the portion you fully reinvest. The IRS evaluates three separate requirements when deciding whether gain is recognized on an exchange.1
1. Value: buy equal or greater
The replacement property's purchase price must be at least equal to the net sale value — the sale price after commissions, title fees, and other closing costs. If you buy a cheaper property, the shortfall is "value boot" recognized as gain regardless of how much equity you reinvest.
Example: you sell for $2.5M and pay $150K in costs, so net proceeds = $2.35M. Your replacement must cost at least $2.35M. Buying a $2.1M property creates $250K of value boot even if you wire every dollar of equity to the qualified intermediary.
2. Equity: reinvest all net proceeds after debt payoff
Any cash you receive from the sale and do not reinvest is "cash boot." Net equity is the amount left after the QI pays off your old mortgage from the sale proceeds. All of it must flow directly into the replacement property. Cash released from the QI account for any reason before the replacement closes becomes taxable boot.2
3. Debt: replacement debt must match or exceed old debt
If you paid off $800K in mortgage at closing and only assume $600K on the replacement, the $200K reduction is "mortgage boot" — taxable even though you never received a check. You can avoid it by: (a) taking on equal or greater debt on the replacement, or (b) putting in extra cash equity to compensate for the debt reduction.3
This is the most commonly missed requirement. Investors focus on reinvesting cash and overlook that reducing leverage is a taxable event inside a 1031 exchange.
When the math doesn't quite work: the DST gap-fill
If you cannot find a direct replacement property that meets all three requirements before the 45-day identification deadline, a Delaware Statutory Trust (DST) can absorb residual equity or serve as the entire replacement. DSTs are pre-assembled institutional properties with debt already in place — they let you reinvest a precise dollar amount into a qualifying property without having to negotiate a purchase.4
Example: you have $1.55M in net equity and $800K in old debt to replace. You've identified a $2.1M rental property that only requires $650K in new debt. The $2.1M value and $150K debt shortfall both create exposure. Adding a $250K DST position alongside the $2.1M property can solve both the value gap and the debt replacement problem simultaneously, because DST positions carry inherent leverage.
See the DST guide for the full eligibility rules, Seven Deadly Sins restrictions, and worked examples.
How to use this calculator before your property lists
The most valuable time to run these numbers is before the sale closes — while you still have the flexibility to structure the deal and line up replacement candidates. Once the sale closes, the 45-day and 180-day clocks are running and your options narrow fast.
- Set your minimum purchase target. The net proceeds figure is your floor. Any replacement property below that price creates value boot regardless of debt or equity structure. Screen candidates against this number first.
- Model the debt requirement early. If market conditions or lender requirements mean you will take on less debt than you paid off, calculate the mortgage boot cost before you're committed to a closing timeline.
- Stress-test cash retention. If you need liquidity from this event — for renovation, estate planning, or personal use — run the "keep $X cash" scenario before signing the exchange agreement. Sometimes a partial exchange is the right answer.
- Identify backup properties in all three slots. The Three-Property Rule lets you identify up to three replacement properties. If your first-choice property falls through, you need alternatives already on the list. See the identification rules guide for when the 200% and 95% rules apply.
When accepting some boot makes sense
A full exchange is not always the right answer. The scenario table above makes this concrete: keeping 15% of equity as cash may produce a relatively small boot tax while the exchange still defers the majority of your gain. A few situations where partial boot is worth considering:
- Liquidity need. If you're reinvesting in a concentrated illiquid asset, maintaining a cash reserve for capital calls, repairs, or personal emergencies may be worth the boot tax.
- Estate planning. Heirs receive a stepped-up basis at death under IRC §1014 (the step-up strategy). If you expect to hold the replacement property until death, the gain deferred by the exchange may never be recognized at all — making the exchange less valuable than it appears, and a partial taxable sale more attractive for current liquidity.
- Weak replacement options. Rushing into a poor replacement property to avoid boot can cost more in the long run than paying the tax and deploying capital intelligently elsewhere. Compare the after-tax math for both paths with a full exchange vs. taxable sale analysis.
- IRC §1031(b); Treas. Reg. §1.1031(b)-1 — gain recognition on receipt of boot in a like-kind exchange. Treas. Reg. §1.1031(j)-1 — exchange group rules governing value and equity reinvestment requirements.
- Treas. Reg. §1.1031(k)-1(f) — safe harbor for qualified intermediaries; requirement that exchange proceeds not be constructively received by the exchanger before the replacement property closes.
- Treas. Reg. §1.1031(b)-1(c) — net reduction in mortgage liabilities treated as money received (mortgage boot). IRS Publication 544, Sales and Other Dispositions of Assets (2025 ed.).
- Revenue Ruling 2004-86 — DST beneficial interests qualify as like-kind replacement property under IRC §1031. OBBBA (July 2025) confirmed no changes to §1031 exchange mechanics or DST qualification rules.
Tax rates verified June 2026. §1250 unrecaptured rate 25% (IRC §1(h)(1)(D), unchanged). LTCG top rate 20% (IRS Rev. Proc. 2025-22). NIIT 3.8% (IRC §1411). §1031 exchange mechanics unchanged under OBBBA.
Get matched with a 1031 exchange specialist
Replacement property selection is one of the hardest parts of a 1031 exchange — you have 45 days to identify and 180 days to close, with significant tax exposure if the deal falls through or the numbers don't work out. A fee-only financial advisor can model replacement options, evaluate DST positions, and pressure-test the exchange structure alongside your qualified intermediary and CPA before the clock starts.