Your gain
How the gain splits by tax rate.
Real Estate Capital Gains Tax Calculator
Capital gains tax on real estate is figured on the gain: sale price minus selling costs minus adjusted basis (purchase price plus improvements minus depreciation). Depreciation is taxed first, at up to 25%; the rest at 0%, 15% or 20%, plus the 3.8% NIIT and state tax. Enter your numbers to see the tax in one year and spread over an installment sale.
By Hans Goldstein · Last updated · Questions: hans@goldsteinco.net, 213-340-2018
Your sale
Tax if paid in one year
Cash sale, all gain this year.
Tax if spread out
Year-by-year tax on an installment sale
Before you sign the contract
Get both options priced for your sale
Your note terms next to a structured sale quoted on the same schedule, with the tax on each, from a person, not a drip campaign. You can also call 213-340-2018.
- Real payout quotes on your schedule, not the illustrative rate above
- Seller financing, structured and cash compared honestly; your CPA stays in charge
- Seller financing pays the operator nothing; see the disclosures
How is capital gains tax on real estate calculated?
Three numbers decide it: what you sold for, what you have in the property, and how long you held it.
- Amount realized = sale price minus selling costs (commission, escrow, title, transfer tax you paid).
- Adjusted basis = purchase price plus purchase closing costs plus capital improvements, minus all depreciation "allowed or allowable" (IRC 1016(a)(2)). You reduce basis by depreciation you were entitled to take even if you never claimed it.
- Gain = amount realized minus adjusted basis. The gain is then split into layers that are taxed at different rates, in this order: Section 1245 recapture, unrecaptured Section 1250 gain, then the rest (IRC 1(h)).
What are the capital gains tax rates on a property sale in 2026?
Long-term gain (property held more than one year) is taxed at 0%, 15% or 20% depending on where it lands on top of your other taxable income (Rev. Proc. 2025-32 for 2026 amounts). Depreciation and the surtax sit on top:
| Layer | Federal rate | Code section |
|---|---|---|
| 0% bracket: taxable income up to $98,900 MFJ, $49,450 single, $66,200 head of household | 0% | IRC 1(h)(1) |
| 15% bracket: up to $613,700 MFJ, $545,500 single, $579,600 head of household | 15% | IRC 1(h)(1) |
| Above those amounts | 20% | IRC 1(h)(1) |
| Unrecaptured Section 1250 gain (straight-line depreciation on buildings) | Ordinary rates, capped at 25% | IRC 1(h)(6) |
| Section 1245 recapture (personal property, cost segregation assets) | Ordinary rates, up to 37% | IRC 1245 |
| Net investment income tax on MAGI over $250,000 MFJ, $200,000 single | 3.8% more | IRC 1411 |
| Held one year or less | Ordinary rates | IRC 1222 |
Most states tax the gain as ordinary income on top of that. California's top rate is 13.3%; Texas, Florida, Nevada and a handful of others have no income tax. The state tax in the calculator comes from the same engine as the full installment sale calculator.
Worked example: a $1,000,000 rental sold in 2026
A married couple in Texas (no state income tax) sells a rental for $1,000,000 with 6% selling costs ($60,000). They paid $400,000 and took $150,000 of straight-line depreciation. Other income is $100,000.
- Adjusted basis: $400,000 - $150,000 = $250,000. Amount realized: $1,000,000 - $60,000 = $940,000. Gain: $690,000.
- Layers: $150,000 unrecaptured Section 1250 gain, $540,000 at 0/15/20%.
- Ordinary taxable income is $100,000 - $32,200 standard deduction = $67,800. The $150,000 of Section 1250 gain stacks on top at ordinary rates: $33,000 at 12% + $110,600 at 22% + $6,400 at 24% = $29,828.
- The $540,000 of long-term gain runs from $217,800 to $757,800 of taxable income: $395,900 at 15% ($59,385) + $144,100 at 20% ($28,820) = $88,205.
- NIIT: MAGI $790,000 - $250,000 = $540,000, less than the $690,000 gain, so 3.8% x $540,000 = $20,520.
- Total if sold for cash: $138,553, about 20% of the gain.
Spread over 10 years with 20% down, the same sale shows about $70,485 of tax in total: year one carries the $150,000 of Section 1250 gain (taken first under Treas. Reg. 1.453-12) and the later years stay in the 15% bracket and under the NIIT threshold. That is about $68,000 less, before interest on the note, which is taxed as ordinary income. Load these numbers into the calculator above to check them.
How does depreciation recapture work when you sell a rental?
Straight-line depreciation on a building is unrecaptured Section 1250 gain: taxed at your ordinary rate but never more than 25%. On an installment sale it is deferrable and comes out of each payment's gain first (Treas. Reg. 1.453-12). Depreciation on personal property and the short-life assets a cost segregation study carves out is Section 1245 recapture: ordinary income, and taxed in full in the year of sale even if you receive no cash that year (IRC 453(i)). That is why a small down payment on a cost-segregated building can leave you owing more tax than cash in year one. See installment sale depreciation recapture and Section 1245 recapture.
How much of a home sale is tax-free?
Up to $250,000 of gain ($500,000 married filing jointly) is excluded if you owned the home and lived in it as your main home for at least 2 of the 5 years before the sale (IRC 121). Gain equal to depreciation after May 6, 1997 (a home office or a period you rented it out) is not excludable (IRC 121(d)(6)), and years of "nonqualified use" after 2008 can reduce the exclusion (IRC 121(b)(5)). Pick "Primary residence" above to apply it. The excess gain is taxed like any other long-term gain, including the 3.8% NIIT at high income, and can still be spread with an installment sale: the excluded gain is left out of gross profit (Form 6252, line 15). More: home sale gain over the exclusion.
Can you avoid the 3.8% net investment income tax?
Not at high income. The tax is 3.8% of the lesser of your net investment income or your modified AGI above $250,000 ($200,000 single), and the thresholds are not indexed (IRC 1411). Gain on a rental or investment property is net investment income. What you can change is timing: an installment sale spreads the gain, so in some years MAGI may stay under the threshold. In the example above, only the first year pays it.
How does an installment sale lower the tax?
Under IRC 453, when at least one payment arrives after the year of sale, you report gain as principal is collected. Each principal dollar is split by the gross profit percentage into taxable gain and tax-free basis, reported each year on Form 6252 (IRS Pub. 537). Two exceptions to know:
- Debt over basis. If the buyer takes over a mortgage larger than your basis, the excess is treated as a payment in the year of sale (Treas. Reg. 15a.453-1(b)(3)).
- Notes over $5 million. Above $5 million of installment notes outstanding at year-end, IRC 453A charges interest on the deferred tax, and pledging the note counts as payment.
There are two ways to get installment treatment. With seller financing, the buyer owes you and you carry the risk of default and early payoff. With a structured installment sale, the buyer pays in full at closing and an assignment company pays you on a schedule you pick before closing. Compare the two on the full calculator.
What does this calculator leave out?
Interest on an installment note, the Section 453A interest charge, alternative minimum tax, suspended passive losses, capital loss carryovers, IRMAA Medicare surcharges, partial home-sale exclusions and nonqualified use, and state rules beyond the rate tables. Later years use the 2026 tables with the same other income. To use a capital loss carryover against the gain, try the capital loss carryover calculator. Educational estimates only; have your CPA run your return.
Keep going
- Installment sale calculator: cash vs seller financing vs a structured sale, with interest and the 453A charge.
- Form 6252 calculator: every line, year of sale and later years.
- Gross profit percentage calculator: the gain in each payment.
- Seller financing hub: terms, taxes and risks for sellers.
- How to spread capital gains over several years.
- Capital gains and IRMAA: the Medicare surcharge two years later.
Real estate capital gains FAQ
How do I calculate capital gains tax on the sale of a property?
Subtract your adjusted basis (purchase price plus improvements, minus depreciation) and your selling costs from the sale price. That is the gain. Depreciation comes back first: Section 1245 recapture at ordinary rates and unrecaptured Section 1250 gain at up to 25%. The rest is taxed at 0%, 15% or 20% if you held the property more than a year, plus the 3.8% net investment income tax above $250,000 of income ($200,000 single) and any state tax.
What is the capital gains tax rate on real estate in 2026?
For property held more than one year: 0% on taxable income up to $98,900 (married filing jointly), 15% up to $613,700 and 20% above that (single: $49,450 and $545,500). Unrecaptured Section 1250 gain from depreciation is taxed at up to 25%. The 3.8% net investment income tax can apply on top. Property held one year or less is taxed at ordinary rates.
Do I pay capital gains tax when I sell my house?
Only on gain above the Section 121 exclusion: up to $250,000 ($500,000 married filing jointly) if you owned and lived in the home for at least 2 of the 5 years before the sale. Gain equal to depreciation you took after May 6, 1997, for a home office or rental period, is not excludable.
Can I avoid the 3.8% net investment income tax on a property sale?
Not at high income. The tax applies to the lesser of your net investment income or the amount your modified AGI exceeds $250,000 ($200,000 single), and those thresholds are not indexed. Spreading the gain over several years with an installment sale can keep some years below the threshold. A real estate professional whose rental is a nonpassive trade or business may be outside it.
How much tax does an installment sale save?
It depends on how much of the gain a one-year sale pushes into the 20% bracket, the 3.8% surtax and higher state brackets. Spreading the principal lets more of the gain land in lower brackets each year. The calculator shows both totals. Depreciation recapture under Section 1245 is still taxed in the year of sale, and the note's interest is ordinary income.