1031 Exchange, Capital Gains Tax Savings & Purchase Calculator

  • Tags: Calculators, New Construction, Spec Homes

If you’re selling an investment property and looking to upgrade or diversify your real estate portfolio, the 1031 Exchange is one of the smartest tools available to preserve your capital and compound your returns. Rather than handing over a chunk of your profit to the IRS, you can defer capital gains taxes and reinvest your full equity into your next deal.

This article walks you through a real-world example using our 1031 Exchange Calculator to estimate your:

  • Tax savings

  • Compounded wealth growth

  • Cash required at closing

  • Monthly housing payment on your next property

What Is a 1031 Exchange?

A 1031 Exchange allows investors to sell an investment property and defer paying capital gains tax, as long as the proceeds are used to purchase another qualifying property. It must be for investment or business use—not a primary residence—and the replacement property must be of equal or greater value.

When structured properly, this strategy helps real estate investors continue building wealth without losing equity to taxes.

Scenario: Using the 1031 Exchange Calculator

Let’s plug in some numbers to illustrate how this works.

Sales Price of Property to Exchange: $500,000
 Mortgage Balance on That Property: $200,000
 Estimated Exit Costs (5%): $25,000
 Capital Gains Tax Rate: 15%
 Purchase Price of New Property: $700,000
 Down Payment (20%): $140,000
 Estimated Annual Insurance: $2,400
 Estimated Annual Property Taxes: $5,000
 Monthly HOA Fee: $0
 Estimated Interest Rate: 6.99%

Capital Gains Tax Savings

Based on these inputs, the estimated tax savings from using a 1031 exchange is $41,250.

Instead of giving that amount to the IRS, you roll it into your next deal—where it continues to work for you.

Compounded Growth of Deferred Taxes

By investing that $41,250 instead of paying it out in taxes, here’s the estimated long-term growth assuming a conservative 3% annual return:

  • 15-Year Growth: $64,266

  • 30-Year Growth: $100,125

That’s a six-figure boost to your future net worth—just by applying this strategy.

Summary of New Property Purchase

Here’s a breakdown of what your mortgage and housing payment might look like for the $700,000 replacement property.

Loan Amount: $560,000
 Monthly Principal & Interest (6.99%): $3,722
 Monthly Insurance: $200
 Monthly Property Taxes: $417
 Total Estimated Monthly Housing Expense: $4,339

This assumes HOA fees are paid separately and are not included in escrow.

How Much Cash Will You Need to Close?

There are two common scenarios:

Without Seller Credit: $285,000
 With 6% Seller Credit Applied Toward Closing Costs: $243,000

These numbers reflect the use of your 1031 exchange equity plus estimated closing costs. This is for planning purposes only—be sure to get an official Loan Estimate from a licensed mortgage advisor.

Key IRS Forms and Requirements

To legally defer taxes with a 1031 exchange, make sure you work with a Qualified Intermediary and comply with all IRS requirements, including:

  • Identifying a replacement property within 45 days

  • Closing on the new property within 180 days

  • Filing IRS Form 8824 for the exchange

Next Steps: Get Preapproved for a 1031 Exchange Purchase

Knowing your numbers is the first step. Getting preapproved for financing is the next. We help real estate investors understand their options, line up strategic funding, and structure deals for long-term growth.

Use our calculator to estimate your cash to close and monthly payments, then schedule a consultation to get preapproved.

Start your next 1031 exchange with clarity, confidence, and expert support.

Request a 1031 Exchange Preapproval Today

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Important Disclaimer

This calculator is for illustrative purposes only and does not constitute financial, legal, or investment advice. Results are based on general assumptions and may not reflect actual performance or eligibility. This is not a loan estimate or approval. Please consult with a licensed mortgage advisor before making financial decisions.

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