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Ken Lam Realty · Tools

Which closing costs can you pay from 1031 money?

Tick what is on your closing statement and paid out of the exchange funds. See what is usually fine, and what usually turns into taxable boot.

%
$
Likely boot from these costs
$0
Usually OK (exchange expenses) commission, escrow, title, transfer tax, QI fee…$0
Usually treated as boot loan costs, rent and deposit credits, insurance, repairs$0
Ask your CPA / QI treatment varies (property tax, HOA prorations)$0
Boot × federal rate $0
California CA taxes gains as regular income$0
Estimated tax on this boot$0
If the "ask" items are boot too$0
Usually treated as / thường được coi là: the IRS has no official list. This sorting follows common Qualified Intermediary practice. Estimate only, not tax advice. Ask your CPA and QI before closing.

Common mistake: "It's all closing costs, so the QI can pay it." Not quite. A simple test many QIs use: would this cost exist if you paid all cash? Loan fees, points and the lender appraisal would not, so they are usually treated as boot. Many investors bring a small check to closing for those instead.

Next steps

  1. Ask escrow for an estimated closing statement on both sides and run it through this list before closing day.
  2. See your full boot and deferred gain in the 1031 calculator (T27).
  3. Ask your QI how they handle rent and deposit credits. Pick a QI with the QI checklist (T226).
  4. Not sure 1031 beats just paying the tax? Compare in T222.
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