Compare selling outright vs 1031 exchange: tax liability, net proceeds, and 10-year wealth projection.
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Depreciation deductions taken over holding period
15–20% federal (plus state if applicable)
Typically 25%
Realtor, closing costs ~6%
Qualified intermediary fee (~0.5–2%)
Expected annual income as % of value
Conservative 2–4%
The Chen family is buying a $340,000 home in Columbus, Ohio. Combined income $115,000, 10% down payment, 30-year fixed at 7.125%.
Takeaway: Columbus/Franklin County averages are the reference baseline. Property tax rates and insurance premiums shift significantly by ZIP code and HOA status. Plug your actual numbers in above.
We default to state-average millage rates. County and municipal rates vary 40%+ within a single state. Ohio ranges from 0.8% (rural counties) to 2.4% (Cuyahoga/Cleveland area). Always cross-check your specific county assessor's published effective rate.
Property Tax by StateHomeowner association fees add $100-$800/month in condos and planned communities. Condos in urban markets often run $400-$700/month. If your property has HOA, add it manually to any payment estimate — it directly affects your debt-to-income ratio for loan qualification.
HOA Fee CalculatorClosing costs typically run 2-5% of the loan amount — around $6,000-$15,000 on a $300K home. Lender fees, title insurance, escrow, and prepaid taxes add up fast. These are due at closing in cash, not rolled into the mortgage by default.
Closing Costs CalculatorPrivate mortgage insurance (PMI) costs 0.5-1.5% of the loan annually until you reach 20% equity. On a $300K loan at 1%, that's $250/month. PMI cancels automatically at 78% LTV under federal law — but you can request removal at 80%.
National home price appreciation has averaged ~4% annually since 1968, but markets diverge dramatically. Sun Belt metros averaged 10%+ during 2020-2022; coastal markets often lag the national average during correction cycles. Local supply constraints are the main driver.
If you've lived in the home 2 of the last 5 years, you can exclude $250K (single) or $500K (married) of gain from federal capital gains tax. Many calculators show gross profit without applying this exclusion. Relevant when projecting sale proceeds.
Home Sale Capital Gains CalculatorBased on your inputs
Capital gains tax deferred (not depreciation recapture)
vs $415,000 if sold outright
Owed when you eventually sell
Net wealth built after taxes
| Current Property Value | $500,000 |
|---|---|
| Original Purchase Price | $350,000 |
| Gain on Sale | $150,000 |
| ─ Capital Gains Tax (not deferred) | $30,000 |
| ─ Depreciation Recapture (25%) | $25,000 |
| ─ Sale Costs (realtor, closing) | $30,000 |
| Net Proceeds (Sell Outright) | $415,000 |
| Net Proceeds (1031 Exchange) | $440,000 |
| Advantage of 1031 | $25,000 |
| New Property Value | $600,000 |
| Expected Cap Rate | 6.5% |
| After 10-Year Appreciation (3% p.a.) | $806,350 |
| Capital Gains on New Property | $206,350 |
| Tax Owed on New Gains (20%) | $41,270 |
| Total Wealth After 10 Years (1031) | $325,080 |
| Cumulative Tax Deferred | $30,000 |
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A Section 1031 exchange lets you defer federal capital gains taxes when you sell an investment property and reinvest the proceeds into another property of equal or greater value within 180 days (45-day ID period, 180-day purchase period).
Depreciation recapture is the 25% tax on the depreciation deductions you claimed over the holding period. If you held a property 10 years and deducted $100K in depreciation, you owe 25% × $100K = $25K recapture tax when you sell—even in a 1031 exchange.
If you plan to reinvest capital into a better-performing property (higher cap rate, better location), 1031 deferral preserves your buying power and compounds wealth. If you want to exit real estate, selling and paying tax may be simpler.
No. 1031 exchanges apply only to investment and business property. Primary residences do not qualify, but you may exclude $250K–$500K of gains if you meet the primary residence sale rules.
Real property held for investment or business: rental houses, apartments, commercial buildings, raw land. Does NOT include personal residences, stocks, bonds, or intellectual property.
Compare after-tax proceeds: selling outright yields cash minus capital gains tax and depreciation recapture. A 1031 exchange preserves 100% of equity for reinvestment but locks you into real estate. Calculate the additional returns from reinvesting the full tax-deferred amount.
The 200% rule allows you to identify more than three replacement properties if their combined fair market value does not exceed 200% of the relinquished property value. This gives more flexibility than the standard three-property rule for finding suitable replacements.
Depreciation recapture is taxed at 25% on all depreciation deductions claimed during ownership. In a standard sale, this adds significantly to your tax bill. A 1031 exchange defers this recapture tax along with capital gains, preserving more capital for reinvestment.
Yes. You can sell one property and buy multiple replacements, or sell multiple properties and buy one replacement. The total replacement value must equal or exceed the relinquished property value to avoid taxable boot. All transactions must close within 180 days.
Boot is the taxable portion when the replacement property is worth less than the relinquished property or you receive cash. Boot is taxed as capital gains up to the amount of your realized gain. Mortgage boot occurs when new debt is less than old debt. Minimize boot by reinvesting all proceeds.
Gain on Sale = Current Value − Purchase Price
Capital Gains Tax = Gain × Capital Gains Rate
Depreciation Recapture = Depreciation Claimed × 25%
Total Tax = Capital Gains Tax + Depreciation Recapture (NOT deferred)
Net Proceeds (1031) = Current Value − Sale Costs − Exchange Fee − Recapture Tax
Every formula on this page traces to a federal agency, central bank, or peer-reviewed institution. We cite the rule-makers, not secondhand blogs.
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Calculations are for educational purposes only. Consult a qualified financial advisor for personalized advice.