1031 Exchange Calculation
The basic formula to calculate the gain or loss from a 1031 exchange starts with the original purchase price of the property to be sold. Next, add the cost of any improvements to the property. Subtract depreciation. The resulting figure is the Net Adjusted Basis for the original property. Now you need to take into account the sale price of the property. Subtract your transaction costs from the sales price (e.g., commissions). Compare the sales price minus costs to the Net Adjusted Basis of the property. A gain represents the amount subject to capital gains taxes. The federal capital gains tax rate is 15 percent. Add in state capital gains taxes as well (rates vary from state to state). You will also need to take into account the effect of depreciation recapture taxes. The amount of these taxes is the amount you will be able to defer, and the amount you will be able to use for investment in a replacement property. TM 1031 Exchange offers a calculator on our website (in the TM 1031 Tool Kit) that allows you to quickly calculate how much you can save in taxes using a 1031 exchange. Please note that the figures derived from the use of this calculator are estimates only. (Consult with a tax expert for an exact calculation applicable to your personal circumstances.) For more information on 1031 exchanges, please browse this website or call us at 1-877-4TM-1031. You may also send an email here team@tm1031exchange.com.
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