How Much Can You Reinvest?
If you were to sell your property, receive the proceeds from the sale, you would need to pay taxes on the income. The amount of tax depends on your tax bracket for that year, as well as your Modified Adjusted Gross Income.
If you are in the 10% or 15% income tax bracket (under $75,900 for married filing jointly), you will be paying no tax on your capital gain. If you are in the 25% to 35% income tax bracket $75,900 – $470,700 for married filing jointly), you will be paying 15% in tax on your capital gains. If you are in the 39.6% bracket, your tax will be 20% of the capital gains.
If you are single, with a Modified Adjusted Gross Income over $200,000, or married, filing jointly, with a Modified Adjusted Gross Income over $250,000 you will also be required to pay an additional 3.8% Medicare tax on the gains.
After reducing the amount of taxes from the sale of your property, you will have considerably less of your equity available for reinvestment.
However, if you purchase a new property through a 1031 Exchange, you can reinvest all of your proceeds, resulting in a larger purchase.
Use the calculator below to determine what your taxes would be, and how much more you could purchase through an exchange.