1031 Exchange - Capital Gains Question

[Daryl Demz]

Situation;

I have a rental property bought in March of 2012 for the amount of $220K.

(Initially used as Primary Residence until Oct of 2017)

Before moving out, In January of 2017, I did a cash-out refinance, and the new loan balance is about $315K.

(The cash out money I used to by another house)

The current property value is about $560K-$590K.

Now, I'm planning to sell my rental and do a 1031 Exchange to deferred  paying taxes.

Problem/Question;

(Here's the part I'm not sure how it works)

Since my base price is $220K, which means I have approximately $315K in gains after paying fees/commissions.

But the existing loan is $310K, which means in closing I will clear approximately $220K.

There is a difference of $95K compared to my true capital gains.

Then, do I have to come up with another 95K to add to my $220K if I have to do a 1031 exchange?

 How will this work? How should I proceed with this?

Is 1031 Exchange even an option or should I just pay capital gains?

Thank you all for responding...

[Dave Foster]

@Daryl Demz, You may have just stumbled onto the mother lode then.  If you do qualify for the primary residence exemption for yourself as singe you still get the first $250K of profit tax free.  And since the property is an active investment property you could 1031 the rest.  So part of the gain would be tax free and the rest would be tax deferred.

That would change your reinvestment target dramatically.