Boot, defined
Boot is any value you receive in an exchange that isn't like-kind property — usually cash left over or a reduction in your mortgage debt. Boot is taxable up to the amount of your gain, even inside an otherwise valid 1031.
Cash boot vs. mortgage boot
Cash boot: proceeds you pocket instead of reinvesting. Mortgage boot: your new loan is smaller than the old one, so you're treated as having received the difference.
Avoiding accidental boot
Reinvest all the equity and replace debt with equal or greater debt (or add cash). Buying a cheaper property, or borrowing less, quietly creates boot.
Frequently asked questions
Is boot taxable?
Yes, boot is taxable up to the amount of your gain, even within a valid 1031 exchange.
How do I avoid boot?
Reinvest all proceeds and match or exceed your old debt level on the replacement property.
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.