1031 exchange or reduce primary home loan

[Vijay H.]

Hello all, Facing a quandary here and wanted to ask what you would do here . I have a rental (sort of fell into this as it was my primary but couldn't sell it in 2011 market), and am thinking of either

1. selling it and buying a 4-plex/other and continue to pull in the passive income stream via 1031-exchange hopefully, or

2. selling it, take the hit of the capital gains/medicare surtax etc and just using the cash to pay down my balance on my primary.  

I am leaning towards 2 just because of the benefits of living almost debt free. here are some numbers (assuming Zillow' estimates are good)

Sale of rental - 650000

Net Adjusted basis - 299000

Capital gain = 286000 (assuming 10% selling cost, and pay  off rental loan of 198K). 

Capital gain tax - 68K (per calc at https://apiexchange.com/capital-gain-tax-calculato...)

After tax equity would -  318K