Many people have questions about how debt impacts their 1031 exchange of real estate. In this article, we’re going to talk about how to manage debt during a 1031 exchange transaction.
The Impact of Debt in a 1031 Exchange
The bottom line is you can still do a 1031 exchange with property that has debt. This is, in fact, quite common in the realm of 1031 exchanges. However, you will need to ensure your replacement property has equal or greater debt than your relinquished property if you want to defer 100% of your capital gains taxes. You can also offset the debt by paying cash out of your own pocket at the closing table.
This is one of three parts of the 1031 exchange “napkin test” for determining if your property qualifies for 1031 exchange. In a nutshell, you want to ensure that your replacement property is equal to or greater than your relinquished property in three categories (value, equity, and debt).
Start the 1031 Exchange Process
Take the first step in the 1031 exchange process by contacting a qualified intermediary at CPEC1031, LLC. We can make sure you have all your ducks in a row before you begin the process and set you up for a successful 1031 exchange with 100% capital gains tax deferral. With decades of experience, our intermediaries have the skills necessary to turn your 1031 exchange dream into a reality. Reach out to our team of like-kind exchange professionals today at our Twin Cities office and get started with your 1031 exchange of real estate.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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