Property Details
Your Tax Bill
Enter sale and purchase price to calculate.
How capital gains tax on real estate works
When you sell investment property, the IRS taxes two separate things: depreciation recapture (the tax benefit you took over the years) and capital gains (the property's appreciation beyond basis). Most sellers underestimate because they only plan for the capital gains portion.
Depreciation recapture (25% flat)
Residential rentals depreciate over 27.5 years, commercial over 39. Every year you claim that depreciation, it reduces your basis. When you sell, the IRS “recaptures” it at a flat 25% regardless of your income bracket. For a $600k rental depreciated to near zero, that's $150k owed before you even get to capital gains.
Long-term capital gains (0%, 15%, or 20%)
Anything above your adjusted basis is capital gain. If you held the property more than a year, it's long-term: 0% if your income is low, 15% for most investors, 20% at the top. State tax stacks on top.
Net Investment Income Tax (3.8%)
High earners (MAGI above $200k single / $250k married) owe an extra 3.8% on investment income, including real estate gains. Check the NIIT box above to include it.
How to defer every dollar of this
A 1031 exchange lets you reinvest the full sale proceeds into another investment property and defer 100% of federal and state capital gains plus depreciation recapture. The tax doesn't go away — it rolls into the new property's basis. Held until death, it gets a step-up and is permanently erased for heirs.