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Rental Property Capital Gains Tax Calculator

Capital gains, depreciation recapture, NIIT, and state tax when you sell a rental

Selling a rental? The tax bill is almost never just "15% of your profit." This calculator computes your real gain from what you paid, what you improved, and what you depreciated — then decomposes the tax at close into federal capital gains (stacked across the 0%, 15%, and 20% brackets on top of your other income), 25% depreciation recapture, the 3.8% net investment income tax, and your state's cut. You'll see the total bill, your net proceeds after tax, and where every dollar of gain lands.

$

What the buyer is paying.

%

Commission, title, transfer tax — these reduce your taxable gain.

$

What you originally paid.

$

Roof, addition, renovation — not repairs. Adds to your basis.

$

Total depreciation over your ownership — it's on your tax returns (Schedule E / Form 4562). The IRS applies recapture whether you claimed it or not ("allowed or allowable").

$

Taxable income for the year besides this sale — sets where your gain starts stacking.

%

Flat rate on the gain. Enter 0 for no-income-tax states.

If so, the §121 exclusion (up to $250k single / $500k married filing jointly) can shelter the regular gain — but never the depreciation taken while it was a rental.

Results
Estimated tax bill at close
$44,178
25.7% effective rate on your $172,000 taxable gain
Net proceeds after tax
$327,822
Sale price − $28,000 selling costs − tax, before any loan payoff
Federal capital gains
$15,300

On $102,000 across the 0/15/20% brackets

Depreciation recapture
$17,500

25% of $70,000 — recognized first

Net investment income tax
$2,778

3.8% above the MAGI threshold

State tax
$8,600

5.0% flat on the gain

How your gain stacks across brackets
$102,000 at 15%

Your $102,000 long-term gain sits on top of $155,000(other income + recapture gain), so it's taxed bracket by bracket from there up.

Selling with owner financing can spread this $44,178 bill across years
An installment sale recognizes gain only as you receive principal — which defers the tax and may keep more of the gain in the 0% and 15% brackets and under the NIIT threshold. See what carrying the note saves.

Estimates use 2026 federal brackets and thresholds. This is a planning estimate, not tax advice — bring it to your tax professional before acting on it.

These estimates assume the sale is taxed on an individual's return: property held in a person's own name, a revocable living trust, or a single-member LLC (a married couple's LLC reported on their joint return works out the same). They don't fit a C corporation, which pays one flat rate with no brackets, filing status or 3.8% tax; an estate or a trust that files its own return, whose brackets are far narrower; or an LLC, partnership or S corporation with several owners, where each owner pays on their own share at their own rates.

Simplifications: no AMT; state tax as one flat rate (no state brackets); MAGI for the 3.8% NIIT approximated as taxable income + standard deduction + that year's investment income (the gain, and on installment schedules the note interest); no capital-loss carryforwards; all depreciation treated as unrecaptured §1250 gain at the 25% cap (yours can be lower if your ordinary bracket is); no §453A interest charge on very large installment balances; no Medicare IRMAA effects.

One of those errs on the optimistic side. §1245 property — appliances, fixtures, and the components a cost segregation study breaks out — is ordinary income, and §453(i) recognizes it in full in the year of sale however the rest of the gain is reported. There is no §1245 input here, so if this property has had a cost segregation study the year-one bill is higher, and the benefit of spreading smaller, than shown.

See the other side of this bill in GoFlexi

This free tool prices a lump-sum sale. The other half of the question — what carrying the note is worth instead — runs free too, pre-tax, on our seller-finance calculator. What Pro adds is this bill computed on your own brackets with depreciation recapture recognized first, and that comparison re-run on top of it.

Year-by-year §453 gain
The depreciation you entered above, recognized first at 25% as unrecaptured §1250 gain — then the rest at your real bracket rate instead of one blended guess, with NIIT, state, and a per-year schedule for your CPA
Carry vs. cash, after tax
The free pre-tax comparison re-run on the bracket-aware bill — present value, breakeven rate, and what the deferral is worth
Structure the note
Down payment, rate, term, balloons — price the note you'd actually carry
Live amortization chart
See principal vs interest over the life of the note
Note appraisal
What your note would sell for if you ever want to cash out early
PDF export
Export the full schedule and summary to bring to your tax professional

...and more — full deal-structuring, resources, lessons, and community access.

About This Rental Property Capital Gains Tax Calculator

Your taxable gain is not sale price minus purchase price. It starts from your adjusted basis — purchase price, plus capital improvements (a roof, an addition, a renovation; not repairs), minus every dollar of depreciation you took while renting. Selling costs (agent commission, title, transfer tax) reduce the amount you're treated as receiving. The gain is what's left: sale price, minus selling costs, minus adjusted basis. Because depreciation lowers your basis, years of depreciation deductions quietly grow the gain you'll eventually be taxed on — which is why the bill on a long-held rental surprises so many landlords.

Depreciation recapture is usually the part sellers don't see coming. The slice of your gain attributable to depreciation — technically "unrecaptured section 1250 gain" — doesn't get the friendly capital-gains brackets. It's taxed at up to 25%, and it comes first: the IRS treats your gain as depreciation coming back before any of it qualifies for the 0/15/20% rates. And it applies whether or not you actually claimed the depreciation — the rule is "allowed or allowable," so skipping the deduction on your returns doesn't make the recapture go away at sale.

The rest of the gain stacks on top of your other taxable income and is sliced across the long-term capital-gains brackets: 0%, then 15%, then 20% as the running total crosses each threshold for your filing status. On top of that, if your income including the gain crosses the net investment income tax threshold ($200,000 single, $250,000 married filing jointly), a 3.8% NIIT applies to the excess. Most states then tax the gain as ordinary income at their own rates. This calculator shows each component separately, so you can see exactly why the effective rate on a rental gain often lands in the mid-20s even for a "15% bracket" seller.

Once you know the bill, you have three real exits. One: sell conventionally and pay it — simplest, and sometimes right. Two: a 1031 exchange — defer everything by trading into another investment property, at the cost of strict deadlines (45 days to identify, 180 to close), like-kind constraints, and staying a landlord. Three: an installment sale — carry owner financing and spread the gain across the years you receive principal, which defers tax like a 1031 but can also permanently shrink it: instead of one lump sum stacking your entire gain into the 20% bracket and NIIT territory in a single year, each year's slice may land back down in the lower brackets. Unlike a 1031, there's no deadline, no replacement property, and you're done being a landlord — you hold a note instead.

Use the calculator to get your number, then look at the decomposition before you decide anything. If recapture and bracket-stacking dominate your bill, that's precisely the situation where spreading the gain with seller financing (or deferring it with a 1031) changes the outcome the most. All figures are estimates using current-year federal brackets and a flat state rate — bring the result to your tax professional before you act on it.

Related calculators

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Home Selling Cost Calculator

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Cap Rate Calculator

Get a property's NOI and capitalization rate from price and rent, then check it against a target cap rate to see the value the income supports.

Frequently Asked Questions

How is capital gains tax calculated on a rental property?

Start with your adjusted basis: purchase price, plus capital improvements, minus all depreciation taken (or allowed). Subtract selling costs from your sale price to get the amount realized, and the difference is your total gain. That gain is then taxed in layers: the part attributable to depreciation is taxed at up to 25% (recapture), the remainder is long-term capital gain taxed at 0%, 15%, or 20% depending on where it stacks on top of your other taxable income, a 3.8% net investment income tax can apply above $200k–$250k of income, and most states tax the gain too. This calculator runs all four layers and shows each one.

What is depreciation recapture on a rental property?

While you own a rental, you deduct depreciation each year — roughly the building's value spread over 27.5 years. Those deductions reduce your basis, and when you sell, the gain attributable to them (called unrecaptured section 1250 gain) is taxed at a maximum 25% rate instead of the regular capital-gains rates. It's recognized first, before any of your gain gets the 0/15/20% treatment. On a rental held 10+ years, recapture is often the single largest piece of the tax bill — which is why it surprises so many sellers.

Do I owe depreciation recapture if I never claimed depreciation?

Generally yes. The tax code reduces your basis by depreciation "allowed or allowable" — meaning the depreciation you were entitled to take, whether or not you actually took it. Skipping the deduction doesn't avoid recapture at sale; it just means you paid more tax during ownership too. If you're in this situation, a CPA can often file Form 3115 to catch up the missed depreciation in the year of sale, so you at least get the deduction that's driving the recapture.

Do I pay depreciation recapture if I sell at a loss?

No. Recapture only applies to gain. If your sale price (net of selling costs) is below your adjusted basis, there's no gain to recapture — in fact, a loss on a rental is generally a deductible section 1231 loss. Note the comparison is against your depreciated basis, not what you originally paid: you can owe recapture even when you sell for less than your purchase price, because depreciation lowered the bar.

Can I use the $250,000/$500,000 home-sale exclusion on a rental?

Only if the property was your primary residence for at least 2 of the 5 years before the sale — common for house-hackers and owners who converted a former home into a rental. If you qualify, the section 121 exclusion ($250k single / $500k married filing jointly) can wipe out part or all of the regular gain — but never the depreciation taken after May 1997, which stays taxable as recapture. Periods of rental use after 2008 can also make some of the gain ineligible ("non-qualified use"), which this calculator doesn't model — ask your CPA if you converted a rental back into a home. Toggle the primary-residence option in the calculator to see the effect.

What is the net investment income tax (NIIT)?

A 3.8% surtax on investment income — including the gain from selling a rental — that applies when your modified adjusted gross income exceeds $200,000 (single or head of household), $250,000 (married filing jointly), or $125,000 (married filing separately). It's charged on the smaller of your investment income or the amount your income exceeds the threshold. Because a large lump-sum gain itself pushes your income over the line, many sellers who never otherwise see NIIT get hit in the year of a sale — one of the specific costs that spreading the gain across years can reduce.

Are selling costs deductible when I sell a rental property?

They reduce your gain rather than being a separate deduction: agent commissions, title and escrow fees, transfer taxes, and legal fees subtract from the amount realized on the sale. Costs of getting the property ready to sell can qualify as improvements (added to basis) if they're capital in nature. Ordinary operating expenses — utilities, insurance, minor repairs while listed — are rental expenses for the year, not adjustments to the sale.

Would a 1031 exchange avoid these taxes?

A 1031 exchange defers all of it — capital gains, recapture, and NIIT — by rolling your equity into another investment property. The trade-offs: you have 45 days from closing to identify replacement property and 180 days to close on it, the replacement must be like-kind investment real estate, you must generally trade equal or up in value and debt, and you're still a landlord afterward. It's the right tool when you want to stay invested in real estate. If you want out of active ownership, an installment sale (carrying owner financing) is the alternative that spreads — and can permanently reduce — the bill without deadlines or a replacement property.

How does selling with owner financing change the tax bill?

In a lump-sum sale, your entire gain is recognized in one year — stacking it into the top capital-gains brackets and usually triggering NIIT. In an installment sale (you carry a note and the buyer pays you over time), you recognize gain only as you receive principal, in proportion to your gross-profit ratio. That defers the tax — and because each year's smaller slice stacks on lower income, more of the gain can land in the 0% and 15% brackets and below the NIIT threshold, a permanent saving, not just a delay. Two caveats: depreciation recapture rules still front-load the 25% slice, and dealer property (property held primarily for resale, like flips) doesn't qualify. GoFlexi's full calculator models the year-by-year installment tax picture.

Do states tax capital gains on a rental property sale?

Most do — typically as ordinary income at the state's regular rates, with no preferential capital-gains bracket (California is the classic example). A handful of states have no income tax at all (Texas, Florida, Nevada, Tennessee, Washington for most gains, and others). This calculator applies one flat rate you enter to the whole gain, which is a good approximation for most states; if yours has meaningful brackets, use your expected marginal rate. Also note the state where the property sits generally gets to tax the gain, even if you live elsewhere.

What if I inherited the rental property?

Inherited property gets a stepped-up basis: your basis is generally the fair market value on the date of the previous owner's death, not what they paid — and the depreciation they took dies with them (no recapture carries over). If you sell soon after inheriting, there's often little or no taxable gain. This calculator assumes a purchased property; for an inherited one, enter the stepped-up value as your purchase price and only the depreciation you took since inheriting.

I flip houses — does this calculator apply to me?

Mostly no, and it matters. Property held primarily for resale — flips, wholesale deals — is dealer property: the profit is ordinary income (taxed at your regular rates, often plus self-employment tax), not capital gain, and dealer property is not eligible for installment-sale reporting, so carrying a note doesn't spread the tax the way it does for a rental. This calculator is built for investment property held for rental or appreciation. If you're a flipper weighing a double close or assignment, see our Double Closing Calculator instead — and confirm your dealer status with a CPA, since it depends on facts, not labels.

My rental is owned by an LLC or a trust — does this calculator apply?

Usually, yes. A single-member LLC and a revocable living trust are ignored for income tax, so the gain lands on your own return and this calculator's brackets, NIIT and filing status all apply. So does an LLC owned by a married couple who file jointly: the profit still ends up on the same joint return. It doesn't fit a C corporation, which pays a flat 21% federal rate with no capital-gains brackets and no NIIT; an estate or a trust that files its own return, whose brackets reach the top rate at a small fraction of an individual's; or an LLC, partnership or S corporation with several owners, where each owner pays on their own share at their own rates. For one owner's share, run the calculator with that owner's share of each dollar figure for the property, and their own income and filing status.

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