What is boot in a 1031 exchange?

Boot is value you receive that is not like-kind property: cash taken out of the proceeds, or debt relief that is not replaced. Under §1031(b) you recognize gain equal to the lesser of your realized gain or the boot received.

What is mortgage boot?

If you pay off more debt on the property you sold than you take on with the replacement, the difference is mortgage boot and it is taxable this year, even if every dollar of cash was reinvested. Bringing outside cash to the purchase offsets it.

What are the 45 and 180 day rules?

You have 45 days from closing to identify replacement property in writing, and 180 days to close on it, or your tax return due date if earlier. Neither deadline can be extended.

FREE · 501(c)(3) NONPROFIT · EDUCATION ONLY

Your 1031 exchange is not tax-free if you took boot.

A §1031 exchange defers the gain only to the extent you trade fully across. Take cash out, or replace less debt than you paid off, and that difference is boot — taxable this year, no matter how perfect the rest of the exchange was. Most people find out from their CPA in April. Find out now.

The property you sold

Sale price

Selling costsCommission, escrow, title.

Your adjusted basisWhat you paid, plus improvements, minus depreciation.

Mortgage paid off at closing

Depreciation claimed over the years Recaptured at 25% before anything else. §1016(a)(2) counts what was allowable, claimed or not.

The property you bought

Replacement purchase price

New mortgage on it

Extra cash you brought to the purchase Out-of-pocket money beyond the exchange proceeds. This offsets mortgage boot.

You

Filing status

Other taxable income

What are you selling?A few states tax these differently. Washington, for one, exempts real estate entirely but taxes a business sale.

Your state

The deadlines that decide this

Boot is usually not a mistake in the math — it is a mistake in the calendar. The free one-page explainer covers the 45-day and 180-day rules, what counts as like-kind, why debt replacement trips up most sellers, and what your options still are if the exchange is already closed.

45 days to identify replacement property, in writing, from the day you close. No extensions, ever.
180 days to close on it — or your tax return due date, whichever comes first.
Debt must be replaced too. Trading $700k of mortgage for $500k creates $200k of boot even if every dollar of cash was reinvested.

We are a 501(c)(3). Nothing is for sale on this page and no one will call you to pitch a product.

Where the boot comes from
Net proceeds from the sale
Cash boot — proceeds not reinvested
Mortgage boot — debt relief not replaced
Total boot received
What gets taxed
Realized gain on the sale
Recognized gain — lesser of gain or boot §1031(b)
Depreciation recapture @ 25% taxed first
Federal capital gains
Net investment income tax @ 3.8%
State income tax
Tax due this year
Gain still deferred into the new property