1031 Exchange Boot Calculator

Boot is the taxable portion of a 1031 exchange — the part you didn't fully defer. It comes in two forms: cash boot (proceeds not reinvested) and mortgage relief boot (net debt reduction the IRS treats as cash received). Enter your exchange details to see exactly how much boot you'd trigger, the tax on it, and the three levers to eliminate it before you close.

What is boot in a 1031 exchange?

Under IRC §1031, you defer all gain when you trade into a property of equal or greater value, taking on equal or greater debt. "Boot" is everything that falls outside that equal-or-greater rule — property or value received that the IRS doesn't count as like-kind.

Cash boot

If the net equity you extract from the sale (Amount Realized minus old mortgage) exceeds the equity you put into the replacement property (replacement price minus new mortgage), the leftover cash is cash boot. Even if the money stays with your Qualified Intermediary until closing, if you ultimately receive it, it's taxable.

Mortgage relief boot (debt relief boot)

If your old mortgage is larger than your new mortgage, the IRS treats the net debt reduction as if you received cash. A common trap: you sell a property with a $600K mortgage, buy a replacement with a $400K mortgage, and expect a fully deferred exchange — but you trigger $200K of mortgage boot unless you bring in additional cash or buy a more expensive replacement that requires more equity.

The rule of thumb: to fully defer, your replacement price must be ≥ Amount Realized, AND your new debt + cash brought in must be ≥ your old debt. Violating either condition triggers boot.

How boot is taxed

Recognized gain on boot follows the same layered tax rules as a direct sale — but capped at the boot amount. The layers, from highest rate to lowest:

1. §1245 ordinary income (up to 37% + NIIT): accelerated depreciation from cost segregation components — recognized first.
2. §1250 unrecaptured gain (max 25% + NIIT): straight-line depreciation on the structure, capped at 25% federal rate.
3. Long-term capital gain (0/15/20% + NIIT): any remaining recognized gain above total depreciation.

Boot in a reverse 1031 exchange

The same boot rules apply if you're doing a reverse exchange — you park the replacement property with an EAT first, but when the exchange settles, if the equity math doesn't work out, you trigger boot on the relinquished property sale.

Working with an advisor on your 1031 exchange

Boot planning is exactly the kind of problem a specialist financial advisor handles well — modeling the exchange equity before you're in the 45-day identification window, stress-testing multiple replacement scenarios, and coordinating with your CPA and Qualified Intermediary. Choosing the right QI is also critical; the analysis doesn't matter if your QI comingles funds or misses a deadline.