Tax-Equivalent Yield Calculator
Your DST’s nominal yield may be worth more than you think. Tax-equivalent yield shows the return a fully taxable investment would need to pay to match your after-tax cash flow after depreciation sheltering.
How to use this calculator ▾
- Enter your 1031 equity (the proceeds you’re reinvesting) and the DST’s Year 1 yield and loan-to-value.
- Add any details from the property you’re selling — carry-forward depreciation and the debt being relinquished.
- Set your tax assumptions: state, federal bracket, Medicare surtax, the building portion of basis, and the depreciation schedule.
- Your tax-equivalent yield and a full breakdown update instantly on the right.
Your Hypothetical DST Investment
Details about the property you’re selling in the 1031 exchange.
Tax Assumptions
This calculator is a hypothetical illustration provided for educational purposes only and does not constitute tax, legal, or investment advice. Results rely entirely on the assumptions you enter and are not a prediction or guarantee of any investment’s performance. Depreciation benefits, tax treatment, and recapture depend on your specific circumstances and current tax law, which is subject to change. DST and 1031 exchange investments involve significant risk, including possible loss of principal, illiquidity, and reduction or elimination of cash distributions. Always review the offering’s Private Placement Memorandum and consult your own tax, legal, and financial advisors before investing. Securities offered through Metric Financial, Member FINRA/SIPC. © Exchange-X, LLC.
What Tax-Equivalent Yield Means in Real Estate
Two investments can advertise the same yield and still leave very different amounts of money in your pocket. Tax-equivalent yield is how you compare them honestly.
Most yields are quoted pre-tax. A bond, a CD, or a dividend stock might pay 5%, but you don’t keep 5% — you keep what’s left after the IRS and your state take their share. With ordinary income taxed at a combined federal, state, and Medicare rate that can approach or exceed 45% for high earners, a “5%” investment can quietly become a 2.7% investment by the time the cash actually reaches you.
Real estate is different, and that difference is the entire point of this calculator. When you own income property — including a fractional interest in a Delaware Statutory Trust (DST) through a 1031 exchange — the tax code lets you depreciate the building. Depreciation is a paper expense: it reduces your taxable income without reducing the cash you receive. So a meaningful portion of your distributions can land in your account tax-sheltered, even though you never spent a dollar to earn the deduction.
Comparing a pre-tax investment to an after-tax investment
This is where investors get tripped up. Putting a DST’s depreciation-sheltered yield next to a fully taxable bond yield is not apples-to-apples — one number is being taxed heavily and the other barely at all. Tax-equivalent yield fixes that by answering a single, practical question:
i.e. the pre-tax return a fully taxable investment would need to pay to match your real, spendable after-tax cash flow.
For example, suppose a 5% DST distribution is partly shielded by depreciation, so only a slice of it is actually taxed. After tax, you keep more of every dollar — and to match that take-home amount, a fully taxable investment might have to pay north of 7%. That gap isn’t a marketing trick; it’s the measurable value of the depreciation shelter, expressed in terms anyone can compare. Enter your own numbers in the calculator above to see the equivalent yield for your situation.
Why this matters for your decision
It levels the playing field
You can finally line a DST up against bonds, CDs, money markets, or REIT dividends on the same after-tax basis instead of comparing a sheltered number to a fully taxed one.
It quantifies the depreciation benefit
The shelter percentage shows exactly how much of your income escapes tax each year — turning an abstract tax perk into a concrete yield advantage.
It reflects your actual tax rate
The higher your combined bracket, the more a tax shelter is worth. A high-income investor gets a larger tax-equivalent uplift than someone in a low bracket from the very same deal.
It measures spendable income
Yield you can’t keep isn’t really yield. Tax-equivalent yield focuses on after-tax cash flow — the money that actually shows up and stays in your account.
A few caveats worth keeping in mind: depreciation lowers your cost basis, so a portion may be recaptured and taxed when the property is eventually sold (though a future 1031 exchange can continue to defer it). Depreciation schedules, the building-to-land ratio, and your personal tax situation all affect the result. Tax-equivalent yield is a comparison tool for the income phase of an investment — not a complete measure of total return, risk, or liquidity.
See What Your DST Yield Is Really Worth
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