Debt Relief Calculator
Calculate mortgage boot when your new mortgage is less than your old mortgage in a 1031 exchange. When you reduce your debt in an exchange, the difference is considered "mortgage relief" and creates taxable boot, even if you don't receive any cash.
Debt Relief Calculator Inputs
Mortgage balance on relinquished property
Mortgage balance on replacement property
Estimated capital gains tax rate (illustrative only)
Understanding Debt Relief and Mortgage Boot
Mortgage Boot: When the new mortgage on your replacement property is less than the old mortgage on your relinquished property, the difference is considered "mortgage relief" or "mortgage boot." This creates taxable income even in a 1031 exchange.
How It Works: If you had a $500,000 mortgage on the old property and only take out a $400,000 mortgage on the new property, you've received $100,000 in mortgage relief. This $100,000 is taxable boot, subject to capital gains tax.
Avoiding Mortgage Boot: To avoid mortgage boot, ensure your new mortgage equals or exceeds your old mortgage. You can also add cash to the replacement property purchase to make up the difference.
Tax Implications: Mortgage boot is recognized as taxable gain to the extent of your total gain on the exchange. The tax rate depends on your income bracket and how long you held the property.
Important: This calculator provides illustrative estimates only. Actual tax rates and treatment depend on your specific situation. Consult a tax advisor for precise calculations.
Educational content only. Not tax, legal, or investment advice. Results are estimates only. Consult a qualified intermediary and tax advisor before making decisions. Colorado does not impose a state real estate transfer tax. Recording fees and title insurance premiums still apply.