Free tools / 1031 exchange capital gains calculator
1031 Exchange Capital Gains Calculator
See what a 1031 exchange would actually save you. Enter your investment property's numbers and get the full tax bill you'd face on a straight sale — capital gains, depreciation recapture, the 3.8% surtax, and state tax — all of which an exchange lets you defer. Free, no signup.
The property
What you're selling it for
Commissions, title, closing — ~6–8%
Renovations added to basis
Total deducted over the years you owned it
Your tax situation
Sets your capital-gains bracket
Tax deferred with a 1031 exchange
$151,255
What you'd owe on a straight sale — an effective 33.2% of your $455,000 gain. An exchange lets you keep it all working.
Tax on a straight sale
- Federal capital gains0/15/20% on appreciation
- $54,750
- Depreciation recaptureup to 25% on depreciation taken
- $22,500
- Net Investment Income Tax3.8%
- $13,490
- State tax (California)
- $60,515
- Total tax
- $151,255
How the gain is figured
- Sale price − costs
- $705,000
- Adjusted basis
- −$250,000
- Total gain
- $455,000
The four taxes a 1031 exchange defers
When you sell an investment property outright, the check you write the government is bigger than most owners expect — because it's really four taxes stacked together. A 1031 exchange defers all four at once by rolling the entire proceeds into a replacement property.
- Federal capital gains — 0%, 15%, or 20%. On the appreciation (what the property gained in value). Which rate applies depends on your total taxable income, because the gain stacks on top of it.
- Depreciation recapture — up to 25%. On every dollar of depreciation you deducted while you owned it. This is usually the sleeper — it can be the largest line in the bill.
- Net Investment Income Tax — 3.8%. An extra surtax on investment gains once your income passes $200,000 (single) or $250,000 (married filing jointly).
- State income tax — 0% to 13.3%. Most states tax the gain as ordinary income. Nine states have no income tax; California's top rate is 13.3%.
Why depreciation recapture blindsides sellers
Depreciation is the deduction that makes rental real estate so tax-friendly while you hold it — you write off a slice of the building's value every year, sheltering rental income. But that deduction isn't free. When you sell, the IRS adds all of it back and taxes it at up to 25%, on top of your capital gains.
Total gain = sale price − selling costs − adjusted basis
where adjusted basis = purchase price + improvements − depreciation taken
Notice depreciation cuts your basis, which raises your taxable gain. That's the trap: the deductions that helped you for years all come due at once. A 1031 exchange defers recapture along with the rest — the single biggest reason serious investors exchange instead of sell.
Deferred, not deleted — but that's the point
A 1031 exchange doesn't erase the tax; it postpones it. But postponement is powerful. Every dollar you don't hand the IRS today stays invested, compounding in a larger property. You can exchange again and again — "swap till you drop" — and under current law, if the property is still held at death, your heirs receive it at a stepped-up basis and the deferred gain disappears. Many investors never pay the bill this calculator shows.
Ready to find your replacement property?
Once the numbers make sense, the clock starts. WhoseTitle turns any neighborhood into a list of owners — with equity and tenure signals — from public county records, free.
1031 capital gains FAQs
How much tax does a 1031 exchange actually save?
It defers four separate taxes you'd otherwise pay on a sale: federal capital gains (0%, 15%, or 20% on appreciation), depreciation recapture (up to 25% on all the depreciation you've deducted), the 3.8% Net Investment Income Tax if your income is high enough, and state income tax (0% in nine states, up to 13.3% in California). Combined, that's often 25–35% of your gain — money that stays invested in the next property instead of going to the IRS.
What is depreciation recapture, and why is it so large?
Every year you owned the rental you deducted depreciation, which lowered your taxable basis. When you sell, the IRS 'recaptures' all of that depreciation and taxes it at up to 25% — separately from your capital gains. Because it accumulates over many years, recapture is frequently the biggest single line in the bill and the number that surprises sellers most. A 1031 exchange defers it along with everything else.
Is the tax gone forever, or just delayed?
Delayed. A 1031 exchange defers the tax — you'll owe it if you eventually cash out without exchanging again. But you can keep exchanging indefinitely, rolling gains from property to property, and under current law the deferred gain is wiped out entirely if the property passes to your heirs at a stepped-up basis. Many investors exchange for decades and never pay it.
How is my capital gains rate determined?
Your long-term capital gains rate (0%, 15%, or 20%) depends on your total taxable income — the gain stacks on top of your other income. That's why the calculator asks for your other income and filing status: a large gain can push part of itself from the 15% bracket into the 20% bracket, and past the threshold where the 3.8% NIIT kicks in.
Does this replace advice from a CPA?
No. This is a planning estimate using top marginal state rates and 2026 federal brackets — it's meant to show the scale of what's at stake so you can decide whether an exchange is worth pursuing. Your actual liability depends on details a calculator can't see. Run the numbers here, then confirm them with your tax advisor and a qualified intermediary before you sell.
Estimates only, not tax advice. Uses 2026 federal capital-gains brackets and top marginal state rates; your actual rate may be lower. Depreciation recapture is capped at 25% and NIIT at 3.8%. Confirm your numbers with a CPA and a qualified intermediary before selling.