Rental Property Capital Gains Tax Calculator

A single investor bought a rental in June 2016 for $300,000, paid $6,000 in closing costs and later spent $20,000 on a new roof and kitchen. With 80% of the cost allocated to the building, depreciation on the building from then to a sale in November 2026 comes to $92,727.27. (The improvements would be depreciated too; leaving that out keeps the example simple, and the calculator's "From my returns" option takes your actual total.) They sell for $500,000 and pay 6% in selling costs, and they earn $90,000 from their job.

The depreciation recapture lands in the 22% and 24% brackets on top of the investor's salary, costing $21,618.54, an average of 23.3%. The remaining $144,000.00 is taxed at 15%, $21,600.00. Because the sale lifts their income above $200,000, the NIIT adds $4,815.64. In all they owe $48,034.18, 20.3% of the gain, and keep $271,965.82 after paying off a $150,000 mortgage.

Income matters a great deal. The same sale by a married couple with $40,000 of other income owes $33,402.91. Their recapture is taxed at 10% and 12% instead of 22% and 24%, and only the part of their income above $250,000 owes the NIIT, $1,015.64. None of their gain gets the 0% rate, though: the recapture counts first and fills that range.

Owing tax after selling for less than you paid

Depreciation can create a taxable gain even on a sale below the purchase price. An investor who bought a rental for $400,000 in 2020 and sells it for $380,000 in 2026 has taken about $77,149.09 of depreciation, so their basis is down to $330,850.91. After selling costs they still have a $26,349.09 gain, all of it depreciation recapture, and owe about $5,796.80.

Most states tax the gain as ordinary income, but some exclude part of it, a few tax it at special rates, and ten don't tax it at all. The table applies each state's 2026 rules to the worked example above, assuming you live in the state where the rental is. Select a state for its own calculator, which applies those rules instead of a flat rate.

• A 1031 exchange. Reinvesting the proceeds in another investment or business property defers the whole tax, recapture included. You must identify the replacement property within 45 days and receive it within 180 days, usually through a qualified intermediary so you never touch the cash. Cash you keep, called boot, is taxed. The deferred gain carries into the new property's basis rather than disappearing.
• Holding past one year. A gain on property owned a year or less is taxed as ordinary income. Waiting until you have owned it more than a year to the day moves most of the gain to the 0%, 15% or 20% capital gains rates.
• Selling in a lower-income year. Because the gain stacks on your other income, a year with less salary or business income can keep more of it in the 0% or 15% range and below the NIIT threshold.
• An installment sale. If you finance part of the price for the buyer, the gain is taxed over the years you collect it, which can keep more of it in lower brackets.
• Keeping records of improvements and costs. Every documented improvement and settlement cost raises your basis and lowers the gain.
• Using suspended losses. Passive losses you couldn't deduct in earlier years generally become deductible when you sell your entire interest to an unrelated buyer, offsetting part of the income.

If you lived in the property as your main home for at least two of the five years before the sale, you may be able to exclude up to $250,000 of gain ($500,000 for most married couples filing jointly), although the part from depreciation stays taxable and periods of rental use can reduce the exclusion. The Section 121 exclusion calculator works out how much.

Flipping is different: if you buy and sell properties as a business, the profit is ordinary income and may be subject to self-employment tax as well; the 1099 tax calculator estimates that, and the S corp tax savings calculator shows what an S corporation election could save on it. Before you list, the DSCR loan calculator shows whether a cash-out refinance on the rent could work instead of a sale.

Rental property capital gains tax has three federal layers: depreciation recapture at your ordinary rates up to 25%, the 0%, 15% or 20% rate on the rest of the gain, and the 3.8% net investment income tax at higher incomes. In the example, a $500,000 sale after ten years costs $48,034.18 in federal tax, 20.3% of the gain.

Gather your depreciation schedule and improvement records before you list, add your state's tax, and compare a sale with a 1031 exchange in the rental property capital gains tax calculator while there is still time to plan one.