Real Estate Capital Gains Tax Calculator — Home Sale vs 1031

IRC Section 121 ownership and use tests

Section 121 is a primary-residence rule. In plain English: if you owned the home and lived in it as your main home for at least two years during the five-year window ending on the sale date, you may exclude gain up to the filing-status cap. Both spouses generally must meet the use test for the $500,000 joint cap, with extra ownership rules. You usually cannot claim the full exclusion more than once every two years. Partial exclusions can apply after certain work, health, or unforeseen-circumstance moves — this tool does not compute those reduced caps.

Enter years owned and years used (0–5). If both are at least two, the estimate treats the Section 121 tests as met for a primary or mixed-use property. Investment-only lots never receive the exclusion here. Remaining gain after the cap is stacked as capital gain. Read the Section 121 guide for exceptions, then return to this calculator to model numbers.

IRC Section 1031 like-kind exchange steps

A like-kind exchange under Section 1031 may defer gain on qualifying US investment or business real property swapped for other qualifying US real property. Personal residences generally do not qualify. After 2017, 1031 no longer applies to stocks, crypto, or most personal property. Typical process: sell the relinquished property; have a Qualified Intermediary hold the proceeds so you do not constructively receive cash; identify replacement property within 45 days; close on the replacement within 180 days (or your return due date, if earlier). Boot — cash, leftover value, or other non-like-kind property — can be taxable even in an otherwise qualifying exchange.

On this page, replacement property value at or above amount realized previews a full deferral of that lot’s tax this year. A lower replacement value is modeled as taxable boot run through the same federal, NIIT, and state engine. This is not Form 8824, not a QI cash trace, and not a reverse or improvement exchange. State 1031 conformity is not modeled per state.

IRC Section 1250 depreciation recapture

When you sell investment or mixed-use real estate, depreciation previously claimed generally reduces adjusted basis and can come back as unrecaptured Section 1250 gain, taxed at a maximum 25% federal rate. Remaining appreciation may still use 0%/15%/20% long-term rates if you held the property more than one year. On a loss, this estimate does not recapture depreciation. Enter the total depreciation you claimed; the tool does not build a year-by-year MACRS schedule.

When to sell vs exchange

Sell when Section 121 covers most of the gain, you need cash proceeds, the property is a home that cannot 1031, or an exchange’s timing and QI costs outweigh the deferral. Exchange when you are rolling investment equity into other US real property and want to defer federal tax (and often recapture) this year, understanding that basis carries over and a later taxable sale can still occur. Mixed-use property is the hardest case: this estimate applies recapture first, then Section 121 to remaining gain if the occupancy tests pass, and allows a 1031 planning path on the investment character. That is not a full Publication 523 allocation by days or square footage.

Use the comparison table after Calculate. Option A is the taxable sale. Option B is the 1031 planning path. The recommendation states which option reduces tax this year on this estimate. Deferral is not elimination. Pair the numbers with IRS Publication 523, Publication 544, and the 1031 guide, then a CPA before you sign a listing or exchange agreement.