Replacement Debt (Equal or Up)
To fully defer, a 1031 exchange must be “equal or up” in value and debt. Enter your sale details to see your replacement-property targets.
How this is calculated
To defer 100% of the tax, your replacement property must be worth at least the net sale price of the property you sold, you must reinvest all of your equity, and you must take on debt at least equal to the debt you paid off (or add equivalent cash in its place). Buying “down” in value or reducing debt creates taxable boot.
Notes & assumptions
- Net sale price here is sale price minus selling costs.
- You can substitute cash for replacement debt to hit the debt target.
- Buying below these targets produces taxable boot on the shortfall.
Frequently asked questions
What does 'equal or up' mean?
Your replacement property must be equal or greater in value, you must reinvest all your equity, and you must carry equal or greater debt (or add cash to make up any difference).
Do I have to take on the same mortgage?
You must replace the debt you paid off, but you can do it by adding cash to the replacement property instead of taking on new debt.
What if I buy a cheaper property?
Buying down in value or debt creates boot, which is taxable up to the amount of your gain. This tool shows the targets to avoid that.
Gerald F. “Jerry” Baker, III — Founder & Managing Principal, Baker 1031 Investments · FINRA Series 22 / 63 · SIE. Read full bio →
This calculator is for educational estimation only and is not tax, legal, or investment advice. Results are approximate and depend on assumptions that may not fit your situation; confirm any figures with your own CPA and attorney before acting. Securities are offered through Aurora Securities, member FINRA/SIPC. Real estate investments involve risk, including possible loss of principal.