Estimate the federal and state tax you'd owe on a sale — capital gains, depreciation recapture, and the 3.8% NIIT — and the amount a 1031 exchange lets you defer.
When you sell appreciated investment property without a 1031 exchange, the IRS collects on three fronts. Most investors are surprised by how large the combined bill can be — and how much of it a well-executed exchange can defer indefinitely.
A fully-qualified 1031 exchange defers every layer listed above — federal capital gains, depreciation recapture, NIIT, and most state tax — as long as you reinvest all your equity into like-kind replacement property and replace at least as much debt as you paid off. The tax isn't forgiven, but it can be deferred indefinitely and potentially eliminated at death via a stepped-up basis for heirs.
Educational estimate only. This tool is for general illustration and is not tax, legal, or investment advice. It uses simplifying assumptions and the figures you enter, which may not reflect your situation or current law; depreciation recapture, net investment income tax, state taxes, and other items can change the result materially. Figures are illustrative and not guaranteed. Consult your own qualified tax and legal advisors before acting. Not an offer or solicitation. DST interests are sold only to accredited investors via private placement memorandum. Securities offered through Aurora Securities, Inc. (ASI), member FINRA/SIPC; Baker 1031 Investments is independent of ASI.
The portion of your gain attributable to the depreciation you deducted over the years. It's taxed at up to 25% — higher than the long-term capital-gains rate — and is often the largest surprise in a sale.
Yes. A fully-qualified 1031 exchange defers federal capital gains, depreciation recapture, and the 3.8% net investment income tax, plus most state tax, as long as you reinvest all your equity and replace your debt.
Long-term gains are taxed federally at 0%, 15%, or 20% depending on taxable income; most investors selling appreciated property are at 15% or 20%. Use your own bracket or ask your CPA.
