1031 Exchange vs. Sell & Pay Taxes: Long-Term Wealth Comparison

See how tax deferral impacts your wealth over time

See the Power of Tax Deferral

When you sell an investment property, you face a critical decision: pay capital gains taxes now, or defer them through a 1031 exchange?

This interactive calculator shows you exactly how much wealth you could build over time by reinvesting your full equity versus paying taxes upfront.

Discover how tax deferral accelerates wealth accumulation—and why many investors choose to "swap 'til they drop."

Property Details

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Expected sale price of your property

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Original purchase price + improvements

How long do you plan to hold the replacement property?

Alternative Investment Returns (Sell & Pay Taxes)

Expected returns for reinvesting your after-tax proceeds (e.g., stocks, bonds, different property type)

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Expected annual return (e.g., 10% for stocks)

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Income yield (e.g., 2% for dividends, or rental income %)

1031 Exchange Returns (Real Estate)

Expected returns for the replacement property in your 1031 exchange

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Historical average: 4-6% for residential, 3-5% for commercial

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Annual net rental income as % of property value

Note: Results update automatically as you adjust the values above.

Ready to Compare Your Options?

Enter your property details on the left to see a personalized comparison of selling and paying taxes versus completing a 1031 exchange.

Understanding the Wealth Gap

The Compounding Effect

When you defer taxes through a 1031 exchange, you keep 100% of your equity working for you. Over time, this creates exponential growth through compounding returns on a larger principal.

The Tax Drag

Paying taxes upfront reduces your reinvestment capital. Even with identical returns, starting with less principal means you'll always be playing catch-up to the tax-deferred scenario.

Time Magnifies the Difference

The longer your investment timeline, the more dramatic the wealth gap becomes. A 20-year horizon can show wealth differences of hundreds of thousands or even millions of dollars.

Estate Planning Benefits

With a 1031 exchange strategy, your heirs may receive a stepped-up basis at death, potentially eliminating the deferred taxes entirely while benefiting from decades of tax-free growth.