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This calculator is for calculating estimated tax liability. Your tax will depend on a number of factors, such as your tax basis in your relinquished property, your sales price, your tax bracket, and your overall tax situation. One important fact to remember is that your tax does not depend on the debt you have on the property. Your tax can exceed the amount of money you take out of the transaction after paying off the debt on the property! In such a situation, an exchange may be an extremely important tool to avoid having to pay money to sell a property. You will pay capital gains tax on the "recognized gain" from your transaction. If you do not perform an exchange, your recognized gain is the difference between what you sell the property for and your tax basis. Thus, if you sell for $50,000.00 and you tax basis is $20,000.00, you will pay tax on a recognized gain of $30,000.00. The amount of tax varies depending on your tax bracket, but for most of our clients, the rule of thumb would be that the capital gains tax (state and federal) will be about one third of the recognized gain. Thus, if the recognized gain is $30,000, the tax will generally be about $10,000.00. Please note that this can vary greatly from state to state and taxpayer to taxpayer. If, in the previous example, you have a mortgage of $45,000.00, and only clear $5,000.00 from the sale, you will still owe the federal and state tax authorities $10,000.00 in capital gains tax. You would have to pay it, even though you only cleared $5,000.00. An exchange might be a very valuable tool for you. We suggest you get sound advice from a licensed professional such as an attorney or an accountant before you sell your property to see if a 1031 Tax deferred exchange is right for you. Disclaimer: The information contained at this site is solely provided for information purposes and does not create a business or professional relationship. This web site is intended to provide basic information about I.R.C. Section 1031 tax-deferred exchanges and does not contain legal advice. Our attorney is licensed to practice law in Washington, while she may be able to assist with an exchange in other jurisdictions, you may still need to consult with an attorney licensed to practice law in your jurisdiction before making specific legal and tax decisions. Send questions, comments or feedback about this site to
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