1031 Exchange Boot Calculator

About this calculator

A 1031 like-kind exchange lets a real estate investor defer capital gains tax by rolling sale proceeds from one investment property into another, but any value the investor pulls out of the exchange rather than reinvesting is called “boot” and is immediately taxable. There are two kinds: cash boot, which is any cash the investor receives or fails to reinvest (for example, if the replacement property costs less than the sale price), and mortgage boot, which arises when the debt paid off on the relinquished property exceeds the new debt taken on the replacement property — reducing your liabilities is treated by the IRS as receiving value.

Real estate investors and their tax advisors calculate boot before closing an exchange because unplanned boot is one of the most common ways an intended fully tax-deferred exchange ends up generating an unexpected tax bill — the rule of thumb to avoid it is that the replacement property must be equal or greater in both value and debt compared with the property sold.

This calculator takes your sale price, mortgage payoff, and the price and new mortgage of your replacement property, and returns your cash boot, mortgage boot, and the resulting taxable gain versus the portion of gain still deferred.