Deferred vs recognized gain
How much of your realized gain stays deferred vs becomes taxable now.
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1031 Exchange Boot Calculator
Swapping investment property to defer capital gains? Estimate your cash boot, mortgage boot, taxable gain and how much gain you defer, so you can structure the deal to minimize a surprise tax bill.
Estimated taxable boot
$70,000
Cash boot—
Mortgage boot—
Realized gain—
Recognized (taxable) gain—
Estimated tax on boot—
Deferring all gain requires buying up in value, reinvesting all equity, and matching your old debt.
Boot, defined
In a 1031 exchange, an investor sells one investment property and buys a like-kind replacement to defer capital gains tax. Boot is any non-like-kind value you walk away with: leftover cash boot, or mortgage boot when your new loan is smaller than the old one. Boot is taxable, but only up to your realized gain, the rest of the gain stays deferred.
The formula
net proceeds = sale − selling costs − old loan
cash boot = max(0, net proceeds − (replacement price − new loan))
mortgage boot = max(0, old loan − new loan)
realized gain = sale − selling costs − adjusted basis
taxable gain = min(cash boot + mortgage boot, realized gain)
cash boot = max(0, net proceeds − (replacement price − new loan))
mortgage boot = max(0, old loan − new loan)
realized gain = sale − selling costs − adjusted basis
taxable gain = min(cash boot + mortgage boot, realized gain)
Worked example
Sell for $600k with $40k costs and a $250k loan → net proceeds $310k. Buy a $520k replacement with a $230k loan (equity $290k). Cash boot = $310k − $290k = $20k; mortgage boot = $250k − $230k = $20k. Realized gain = $600k − $40k − $320k basis = $240k. Taxable gain = min($40k, $240k) = $40k; at 20% that's about $8,000 in tax, with $200k of gain still deferred.
Frequently asked questions
What is boot in a 1031 exchange?
Non-like-kind value received, cash or debt relief, that becomes taxable.
How is cash boot calculated?
Net exchange proceeds you don't reinvest into replacement equity.
What is mortgage boot?
Debt relief when your new loan is smaller than the old one.
How do I avoid boot entirely?
Buy up in value, reinvest all equity, and match or exceed old debt.
Is this tax advice?
No, consult a CPA; exchanges have strict rules and recapture.