1031 or sell and pay the tax? See it over 10–20 years
Enter your rental. See the tax if you sell today, layer by layer, and what each of 4 paths leaves you years from now.
$
$
$
$
yrs
%
$0
1 · Sell now, pay tax, reinvest the rest
2 · 1031 now, sell later
3 · 1031 and keep it for the heirs (step-up)
Heirs get basis = value at death (§1014). Deferred gain is wiped out. Value shown before any estate tax.
4 · 1031 into a DST, sell later
Gain if you sell today sale price − adjusted basis$0
Depreciation part (unrecaptured §1250)$0
Rest × federal 0/15/20%$0
NIIT 3.8%$0
California$0
Tax if you sell today$0
Cash left to reinvest (path 1)$0
Estimate only, not tax advice. Same growth for every path. Rent, loans, new depreciation and fees other than the DST load are left out. Ask a CPA and a QI before you sign.
Common mistake: "1031 means no tax." It means tax later. Sell the new property for cash and the old gain comes due, and the depreciation part is still taxed up to 25%. Only path 3, holding until death, erases it.
Next step
Not sure the property even qualifies? Check it first: T220.
Going with 1031? Run the boot and the 45/180-day dates: T27, then the identification rules: T221.
Thinking DST or "no more landlord"? Compare the exchange types: T228.
Buying outside California? CA still follows the gain: T225.