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Capital Gains Tax Calculator (Real Estate)

Selling an investment property? See how much tax you might owe — and how much cash you'll actually keep.

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Total Tax Est.
—fill in fields below

What do you want to calculate?

Enter purchase info, sale details, and tax rates to estimate your total capital gains tax and net cash after tax.

Adjusted Basis

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$

Closing costs paid at purchase increase your cost basis and reduce your taxable gain.

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Additions, renovations, and permanent improvements that added value add to your basis.

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If you don't know accumulated depreciation, estimate it using a depreciation calculator or your tax records. Entering 0 may significantly understate tax.

→ Depreciation Calculator

Sale Details

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$

Agent commissions, title fees, and other costs reduce your net sale price.

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Mortgage payoff reduces cash proceeds, not taxable gain. It does not affect the tax calculation.

Tax Rates

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Typical long-term rates: 0%, 15%, or 20% depending on income. Short-term gains use ordinary income rates (up to 37%).

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State tax is simplified as a flat rate on total gain. Some states tax capital gains as ordinary income, while others use different rules. This is a rough estimate.

Include NIIT (Net Investment Income Tax)

Adds 3.8% on total gain. NIIT is shown as an upper-bound estimate. Actual NIIT depends on income level and may apply to a smaller portion of gain.

Property Info

Properties held under 1 year are typically taxed as ordinary income (short-term rates).

Enter values above

Purchase price, sale price, and federal rate required

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Overview — Capital Gains Tax on Real Estate

When you sell an investment property for more than you paid, the profit is subject to capital gains tax. But the calculation is rarely as simple as subtracting your purchase price from the sale price. Your adjusted basis — which includes closing costs, capital improvements, and accumulated depreciation — determines the actual taxable gain.

Depreciation is particularly important: if you've taken depreciation deductions over the years (standard for rental properties), the IRS requires you to "recapture" that depreciation at sale, taxed at up to 25% regardless of your income level. This recapture often surprises investors who focus only on the long-term capital gains rate.

State taxes add another layer of complexity. Most states tax capital gains as ordinary income, though a few exempt them entirely. This calculator uses a simplified flat-rate approach for state tax — useful for quick estimates, but not a substitute for state-specific analysis.

Finally, high-income investors may owe the Net Investment Income Tax (NIIT) — an additional 3.8% on investment income including capital gains. This calculator shows NIIT as an optional upper-bound estimate. Always verify with a tax professional whether NIIT applies to your specific situation.

How to Use This Calculator

  1. 1
    Enter your adjusted basis. Start with the purchase price, then add closing costs paid at acquisition and any capital improvements made during ownership. Subtract accumulated depreciation taken on the property over the holding period.
  2. 2
    Enter sale details. Input the expected sale price and anticipated selling costs (broker commissions, title fees, etc.). If you have a mortgage to pay off, enter the payoff amount — it reduces your cash but does not affect taxable gain.
  3. 3
    Set your tax rates. Enter your applicable federal capital gains rate (0%, 15%, or 20% for long-term; higher for short-term). Add a state rate if applicable. Toggle NIIT if your income is above $200K (single) or $250K (married).
  4. 4
    Review the result. The calculator shows total estimated tax, cash after tax, and a tax drag verdict. Use the breakdown to understand how much comes from depreciation recapture vs. long-term gains.
  5. 5
    Evaluate your options. If tax drag is high (above 25%), consider the federal rate sensitivity table to understand how rate changes affect your take-home. Evaluate a 1031 exchange to defer the tax if you plan to reinvest.

Pro Tips

  • Use the Find Sale Price mode to reverse-engineer the price you need to hit a target after-tax proceeds.
  • Use the Find Max Rate mode to stress-test: at what rate does this deal stop making financial sense?
  • Save multiple scenarios to compare different sale prices, depreciation figures, or state tax assumptions.

Inputs & Outputs

FieldTypeDescription
Purchase PriceRequiredOriginal acquisition cost
Purchase Closing CostsOptionalClosing costs at purchase — added to basis
Capital ImprovementsOptionalPermanent value-adding improvements
Accumulated DepreciationOptionalTotal depreciation taken — reduces basis, triggers recapture
Sale PriceRequiredExpected gross sale price
Selling CostsOptionalBroker commissions, title fees — reduces net sale price
Mortgage PayoffOptionalRemaining loan balance — affects cash only, not tax
Federal RateRequiredYour applicable federal capital gains rate (%)
State RateOptionalState capital gains rate — applied as flat rate on total gain
NIIT ToggleOptionalAdds 3.8% NIIT on total gain (upper-bound estimate)
Ownership TypeOptionalInvestment / Primary / Mixed-use — affects warnings shown
Holding PeriodOptionalYears owned — triggers short-term warning if <1 year
Total Est. TaxOutputRecapture + Federal CG + State + NIIT
Cash After TaxOutputNet proceeds after all taxes and mortgage payoff
Tax DragOutputTotal tax as % of cash before tax (drives verdict)
VerdictOutputLow / Moderate / High / Severe / Cash Shortfall

Formula — Step by Step

The capital gains tax calculation for real estate involves five sequential steps. Each step builds on the previous, and skipping any one of them leads to an inaccurate estimate.

Step 1 — Adjusted Basis
Adjusted Basis = Purchase Price + Closing Costs + Improvements − Accumulated Depreciation
Step 2 — Net Sale Price
Net Sale Price = Sale Price − Selling Costs
Step 3 — Total Gain & Split
Total Gain = Net Sale Price − Adjusted Basis
Depreciation Recapture = min(Accumulated Depreciation, Total Gain)
Long-Term Capital Gain = Total Gain − Depreciation Recapture
Step 4 — Tax Calculation
Recapture Tax = Depreciation Recapture × 25%
Federal CG Tax = Long-Term Gain × Federal Rate
State Tax = Total Gain × State Rate (simplified flat rate)
NIIT (if toggled) = Total Gain × 3.8% (upper-bound estimate)
Total Tax = Recapture Tax + Federal CG Tax + State Tax + NIIT
Step 5 — Cash Proceeds
Cash Before Tax = Net Sale Price − Mortgage Payoff
Cash After Tax = Cash Before Tax − Total Tax
Tax Drag = Total Tax ÷ Cash Before Tax × 100%

Real-World Example

Purchase: $300,000 | Improvements: $20,000 | Depreciation: $40,000 | Sale: $480,000 | Selling Costs: $28,800 | Federal Rate: 15% | State Rate: 5%

  • Adjusted Basis: $300,000 + $20,000 − $40,000 = $280,000
  • Net Sale Price: $480,000 − $28,800 = $451,200
  • Total Gain: $451,200 − $280,000 = $171,200
  • Recapture: min($40,000, $171,200) = $40,000 → Tax: $40,000 × 25% = $10,000
  • LTCG: $171,200 − $40,000 = $131,200 → Federal: $131,200 × 15% = $19,680
  • State: $171,200 × 5% = $8,560
  • Total Tax: $10,000 + $19,680 + $8,560 = $38,240
  • Cash After Tax (no mortgage): $451,200 − $38,240 = $412,960

What Is Capital Gains Tax on Real Estate?

Capital gains tax is the federal (and often state) tax on the profit from selling an asset. For real estate, it applies when you sell a property for more than your adjusted basis. The tax rate depends on how long you held the property: long-term gains (held over 1 year) receive preferential rates of 0%, 15%, or 20%. Short-term gains (held 1 year or less) are taxed as ordinary income — up to 37%.

Depreciation recapture is a critical component that many first-time sellers overlook. If you've deducted depreciation on a rental property, the IRS taxes that recaptured amount at up to 25% — regardless of your capital gains rate. This applies even if you never actually claimed depreciation (the IRS assumes "allowed or allowable" depreciation).

The formula for your taxable gain is not simply Sale Price minus Purchase Price. Your adjusted basis accounts for all the basis-changing events during ownership: closing costs at purchase add to basis; capital improvements add to basis; depreciation reduces basis. Getting the adjusted basis right is essential for an accurate estimate.

Long-Term Rates

0% / 15% / 20%

Held > 1 year

Recapture Rate

Up to 25%

On depreciation taken

Short-Term Rates

Ordinary income

Held ≤ 1 year

What Your Result Means

Low Tax Drag< 15%

Strong after-tax liquidity. A small fraction of your proceeds go to tax. Selling now is likely favorable — consider deploying capital to a new opportunity.

Moderate15–25%

Tax is meaningful but not severe. Compare the after-tax proceeds against the opportunity cost of holding. A 1031 exchange may be worth evaluating if you plan to reinvest.

High Tax Drag25–35%

A significant share of proceeds goes to tax. Explore timing strategies (waiting for long-term treatment), installment sales, or a 1031 exchange before committing to a sale.

Severe> 35%

Tax consumes an outsized portion of equity. A 1031 exchange, installment sale, or opportunity zone investment should be seriously evaluated. Consult a tax advisor before proceeding.

Cash Shortfall: When total tax plus mortgage payoff exceed net sale proceeds, you'll need to bring cash to the table. This is more common than many sellers expect when large mortgages combine with significant accumulated depreciation. Consider all-cash buyers, renegotiating the price, or a 1031 exchange to avoid this scenario.

Capital Gains Tax Benchmarks by State & Scenario

Federal capital gains tax rates have three tiers for long-term gains in 2026: 0% (taxable income under ~$47K single / ~$94K married), 15% (most investors), and 20% (income over ~$518K single / ~$583K married). On top of these, the NIIT adds 3.8% for high-income taxpayers.

State capital gains tax rates vary dramatically. Several states — including Florida, Texas, Nevada, and Washington — impose no income tax and thus no state capital gains tax. California, on the other hand, taxes capital gains at ordinary income rates up to 13.3%, one of the highest in the country.

StateCG Tax TreatmentMax Rate (2026 est.)Notes
CaliforniaOrdinary income13.3%No special CG rate
New YorkOrdinary income10.9%+ NYC surcharge up to 3.876%
OregonOrdinary income9.9%No special CG rate
MinnesotaOrdinary income9.85%No special CG rate
ColoradoOrdinary income4.4%Flat rate
TexasNone0%No state income tax
FloridaNone0%No state income tax
NevadaNone0%No state income tax
State tax disclaimer: State tax is simplified in this calculator as a flat rate on total gain. Some states tax capital gains as ordinary income with brackets, while others use different rules. Always verify with a state-specific tax resource or CPA.

Strategy — Managing Capital Gains Tax on a Sale

1031 Exchange

Defer all capital gains and depreciation recapture tax by reinvesting proceeds into a like-kind replacement property within 45/180 day deadlines. Tax is deferred — not eliminated — but allows full equity reinvestment. This calculator does not determine eligibility; consult a Qualified Intermediary.

Hold to Long-Term Status

If your holding period is under 1 year, waiting until the 1-year mark converts your gain from short-term (ordinary income rates up to 37%) to long-term rates (0%, 15%, or 20%). This alone can save tens of thousands on a significant gain. Use the sensitivity table to quantify the difference.

Installment Sale

Rather than receiving all proceeds at closing, spread payments over several years via a seller-financed note. This spreads the capital gains over multiple tax years, potentially keeping you in lower brackets each year. Note: depreciation recapture is typically due in the year of sale, regardless of payment schedule.

Opportunity Zone Investment

Invest capital gains into a Qualified Opportunity Fund (QOF) within 180 days of the sale. Gain recognition is deferred, and if held 10+ years, appreciation in the QOF itself may be tax-free. Best for investors with large gains who can tolerate a 10-year hold. Consult a tax attorney familiar with OZ rules.

Key principle: The goal of tax planning is not to avoid tax — it's to time and structure it optimally. Enter your values above to see how much is at stake before choosing a strategy.

Applications — When to Use This Calculator

Pre-Sale Decision Analysis

Before listing a property, understand exactly how much of the sale price you'll keep. Compare different price points and timing scenarios to set a realistic net proceeds expectation.

1031 Exchange Evaluation

Quantify the tax you'd owe if you sold outright vs. what you'd defer with a 1031 exchange. The deferred amount represents additional capital available for reinvestment into the replacement property.

Portfolio Repositioning

When rotating out of one property type into another, calculate after-tax proceeds from the sale to know exactly how much capital you have to deploy. Tax efficiency is a key input to portfolio restructuring decisions.

Depreciation Impact Modeling

Run multiple scenarios with different depreciation figures to understand the marginal cost of accelerated depreciation strategies. Bonus depreciation upfront lowers current taxes but increases recapture tax at sale.

Offer Negotiation Support

Use the Find Sale Price mode to determine the minimum gross price needed to achieve your after-tax target. This prevents accepting an offer that looks attractive on the surface but delivers insufficient after-tax proceeds.

State Tax Comparison

Run the same scenario with different state rates to compare the after-tax outcome of selling in one state vs. another. Particularly useful for investors with properties in multiple states or considering relocation.

Industry Standards

IRC Section 1250 — Depreciation Recapture

Under IRS Section 1250, depreciation taken on real property is subject to recapture when the property is sold. The recapture is taxed at a maximum rate of 25% ("unrecaptured Section 1250 gain"). This applies to all residential and commercial rental property where straight-line depreciation was taken. The 25% rate applies regardless of the investor's ordinary income tax bracket — it is a hard cap specific to real estate depreciation recapture.

IRC Section 1031 — Like-Kind Exchange

Section 1031 of the Internal Revenue Code allows investors to defer capital gains and depreciation recapture by exchanging one investment property for another like-kind property. The 45-day identification window and 180-day closing deadline are strict — missing either deadline eliminates the deferral entirely. A Qualified Intermediary (QI) must hold the exchange proceeds; the seller cannot take constructive receipt of funds.

IRC Section 121 — Primary Residence Exclusion

Single filers who have owned and used a home as their primary residence for at least 2 of the last 5 years can exclude up to $250,000 of capital gains from tax. Married filers filing jointly can exclude up to $500,000. This exclusion does not apply to depreciation recapture — any depreciation taken (e.g., for a home office or prior rental use) is still subject to recapture tax. This calculator does not implement Section 121; primary residence cases show a warning.

Limitations

Simplified State Tax

State capital gains tax is estimated as a flat rate on total gain. In practice, states use a variety of methods: some apply progressive brackets, others use ordinary income rates with phase-outs, and a few offer partial exclusions for real estate gains. This calculator provides a rough estimate only.

NIIT Upper-Bound Estimate

NIIT (3.8%) applies only to net investment income that exceeds the MAGI threshold ($200K single / $250K married). This calculator applies it to the full gain as an upper-bound estimate. Actual NIIT may be zero or apply to only a portion of the gain depending on total income.

No Section 121 Exclusion

The primary residence exclusion (up to $250K/$500K) is not calculated. If the property qualifies for Section 121, actual tax may be substantially lower. A warning is shown when primary residence is selected, but the estimate does not incorporate the exclusion.

No Income-Level Rate Determination

This calculator requires you to enter your applicable federal rate — it does not determine which rate applies based on your income. Capital gains rate brackets change annually and depend on filing status, AGI, and other income. Use IRS rate schedules or consult a CPA to determine the correct rate before entry.

When not to rely solely on this calculator:

  • Primary residences with potential Section 121 eligibility
  • Mixed-use properties with complex allocation between residential and commercial use
  • Properties with Section 1245 personal property recapture (equipment, improvements)
  • Installment sales where gain is spread across multiple tax years
  • Properties with passive loss carryforwards that may offset gain
  • Transactions in states with complex capital gains tax regimes

5 Common Mistakes When Estimating Capital Gains Tax

  1. 1. Forgetting Depreciation Recapture

    The most common mistake. Many investors know their purchase price and sale price but don't account for accumulated depreciation — which reduces basis and triggers recapture tax at 25%. On a property held 15 years, this can add $30,000–$80,000 in tax. Always enter accumulated depreciation even if you're unsure of the exact figure.

  2. 2. Assuming Mortgage Payoff Reduces Tax

    A large mortgage payoff can dramatically reduce your cash proceeds — sometimes to near zero. But it does not reduce taxable gain. Tax is calculated on the gain (sale price minus basis), not on the cash received. This catches sellers off guard when taxes are due on gains they don't actually receive as cash.

  3. 3. Using the Wrong Federal Rate

    The 15% long-term rate applies to most investors, but not all. If your income is high enough to push you into the 20% bracket — or if you held the property short-term — the wrong rate understates your liability significantly. Verify the applicable rate using current IRS income thresholds before making decisions.

  4. 4. Not Including Capital Improvements in Basis

    Every dollar of documented capital improvement (roof replacement, HVAC, additions) increases your basis and reduces taxable gain — dollar for dollar. Many investors fail to track and include these, overstating their gain and overpaying tax. Keep records of all significant improvements throughout ownership.

  5. 5. Ignoring State Tax Entirely

    In states like California or New York, state capital gains tax can rival the federal liability. A California investor in the 13.3% bracket owes more to the state than to the federal government at the 15% rate. Always include state tax in your pre-sale analysis — especially if considering a 1031 exchange, where state rules may differ from federal rules.

Frequently Asked Questions