The numbers · 1031 exchange calculator · Wealth
The tax you don't pay is an asset.
Sale price, basis, depreciation — out comes the bill an outright sale triggers, and the wealth gap the deferral opens over the years that follow.
Inputs
Sale price$800k
Original basis (price + improvements)$450k
Depreciation taken$120k
Federal cap gains rate20.0%
State rate5.0%
Reinvested equity growth9.0%/yr
Years forward15 years
Selling costs at 7%. Recapture taxed at 25% federal + state; appreciation at your capital gains + state rate. Estimates for planning — exchanges run through a QI and a CPA, in that order.
The sale, taxed vs. exchanged
Net sale proceeds
$744k
Recapture tax (25%+)
−$36k
Capital gains tax
−$74k
Redeploy if sold
$635k
Redeploy if exchanged
$744k
The deferred tax, compounding for 15 years
1031 exchangeSell and pay tax
Tax deferred
$110k
$36k recapture + $74k gains
Extra wealth by year 15
$399k
What the deferred tax becomes at 9%/yr
Total gain
$414k
Basis after depreciation: $330k
The verdict
Selling outright hands $110k (15% of your equity) to the IRS this year. Exchanged instead, that money keeps compounding — worth $399k of extra wealth by year 15 at 9%. Chain it, and under current law the step-up at death means the deferred bill is never paid at all.