How much does a 1031 exchange cost?

The forward exchange number, and the five documents it buys

Two independent published schedules put the base fee in the same place. Exeter quotes $1,000 to $1,500 at a regulated provider and $750 to $1,000 elsewhere, while 1031.com says the fee typically runs about $750 to $1,500, with many straightforward deals landing around $800 to $1,000.

That fee is for paperwork and custody, not advice. It covers the exchange agreement, the assignment of your sale contract with the written notice the regulation requires, the account that holds the proceeds, receipt of your identification, and the funding of the replacement closing.

It is normally taken from the proceeds at the relinquished closing and shown on the settlement statement, so nothing comes out of pocket.

What it does not buy is an opinion on whether to exchange, which property to buy, or how much tax you are deferring. Those hours are billed by other people, and they belong in the same budget.

The add-ons that turn a quoted fee into the number you actually pay

Ask for the fee schedule rather than the headline. Exeter lists a per-property charge of $300 to $500 at regulated providers and $200 to $300 elsewhere, and transactional charges of $30 to $50 for each disbursement, which matter when the intermediary wires a deposit, a purchase and a balance back to you.

Get the schedule as a document, not a sentence on a call. A firm that will not put per-property, per-wire and per-draw charges in writing before your closing is also unlikely to fix the fee in the exchange agreement, which is the condition §1.468B-6(b)(4)(ii) attaches to netting that fee out of your earnings.

• One more relinquished property or one more replacement closing: a second file fee, not a discount
• Each wire out of the account, including earnest money sent to escrow before the purchase closes
• Earnings on your balance where the agreement does not pay them to you, which Do I earn interest on my exchange funds? prices out
• Foreign or multi-state files, where Exeter quotes $75 to $150 per wire and a separate fee range
• Document turnaround inside a few days of closing, which some firms treat as a rush item

Why parking structures cost five to ten times as much

In a reverse or improvement exchange an accommodation party has to form an entity, take title, sign for or guarantee financing, carry insurance and hold the property. The IRS describes the structure in FS-2008-18: the replacement is acquired through an exchange accommodation titleholder, with whom it is parked for up to 180 days while the relinquished property is sold.

Exeter quotes $6,000 to $15,000 for a standard reverse at regulated providers and $4,500 to $7,000 elsewhere, with additional parked properties often starting at $1,000 each; 1031.com puts the range at roughly $5,000 to $15,000 or more. Improvement exchanges run $7,000 to $15,000 at regulated providers by Exeter's schedule, with $100 to $150 charged for each construction disbursement.

None of those numbers includes the entity formation, title insurance, lender consent and carrying costs of the parked property. Reverse 1031 exchanges and Improvement and build-to-suit exchanges set out when the structure earns its keep.

The choice is rarely about the fee. A parking structure exists because the replacement had to be secured before the sale closed, and the question is whether that certainty is worth several thousand dollars against the tax at stake.

The bills that are not the intermediary's: your CPA, your attorney and the closing table

You, not the intermediary, file Form 8824 with the return for the year of the sale, so its preparation sits with your accountant, along with the basis, recapture and state calculations behind it. No national fee figure for that work is published; ask for a quote for the year of the sale specifically, because it is not an ordinary return year.

Attorney time appears where title, entity or related-party structure is in play rather than in a simple sale. Does a 1031 exchange company give tax advice? sets out who does what.

Commissions, title and escrow fees, recording charges and transfer taxes are the same whether or not you exchange. Reg. §1.1031(k)-1(g)(7)(ii) names exactly these as transactional items to be disregarded: title company fees, recording or transfer taxes, prorated taxes and commissions. Local custom, not the exchange, decides who pays each one.

The fee reduces your taxable boot, which is why it is cheaper than it looks

Exchange expenses are not a deduction, they are a reduction in what you are taxed on. The Form 8824 instructions direct you at line 15 to reduce the sum of cash and other property received, but not below zero, by any exchange expenses you incurred, and line 18 picks up expenses not already used there.

The reduction is not automatic on every line. Expenses already used to reduce the amount realised on the relinquished side are excluded from line 18, so the same dollar is counted once, and the settlement statements are the evidence that a return preparer will ask for.

So a $1,250 intermediary fee paid from the proceeds shaves $1,250 off the boot figure that flows to Form 4797 or Schedule D. Are qualified intermediary fees deductible or added to basis? works through the rest.

A hypothetical $400,000 gain, and the fee measured against it

Take a hypothetical seller in the top long-term bracket and above the net investment income thresholds, with a $400,000 realised gain of which $100,000 is unrecaptured section 1250 gain. The IRS caps that portion at a 25% rate, so $25,000; the remaining $300,000 at 20% is $60,000; the 3.8% net investment income tax on $400,000 adds $15,200.

That is $100,200 of federal tax before any state tax, against a $1,250 intermediary fee, or about 1.2%. The comparison changes with the size of the gain, which is the subject of What is the minimum gain that makes a 1031 worth the fees?.

Two costs sit outside this arithmetic. Selling costs and debt repayment reduce what you can reinvest, and a securitised replacement carries its own load, which DST fees and loads quantifies. Have your CPA or attorney price your own facts before you commit to a structure.