If you want a completely tax deferred transaction you must do these three things. First, buy Replacement Property which is equal or greater than the net selling price of what you sold. Two, move all your equity from the old property into the new property. And three, replace your debt.
How much replacement property should you buy?
It is important to understand how the math associated with a 1031 exchange can impacts your ownership. A completed 1031 exchange not only defers capital gain and depreciation recapture taxes, it also dramatically increases your buying power as well.
When considering a Replacement Property you need to know how much property value to acquire to successfully defer your capital gain and depreciation recapture taxes. To assist you, this nearby wizard will help you determine your ideal net purchase price, cash downpayment and the amount of debt you'll need to have a toally tax deferred transaction.
It is critical that you understand the underlying math for your 1031 exchange!