Capital Gains Tax Calculator — Sale of a Rental Property

Selling a rental triggers more than capital gains tax. Estimate the whole bill — depreciation recapture, federal capital gains (2026 rates), the 3.8% surtax, and state tax — and see your net cash at closing.

The sale

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Your cost basis

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Not sure what you've depreciated? It's roughly the building portion of your basis ÷ 27.5 for each year you rented it. Our depreciation calculator gives the annual figure — multiply by the years owned.

Your tax profile

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Jarsl — Rental Sale Tax Estimatejarsl.com

The bill

Estimated total tax on the sale
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Total capital gain
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Total tax
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Effective rate on gain
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Net cash at closing
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Cap-gains rate: — Recapture: $0 Adj. basis: $0

How the gain is figured

Sale price$0
− Selling costs$0
Amount realized$0
− Adjusted cost basis$0
Total capital gain$0

The tax, line by line

Depreciation recapture (25%)$0
Capital gains tax$0
Net investment income tax (3.8%)$0
State tax$0
Total tax$0
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Where your gain goes

Of your total capital gain, this is the slice that becomes tax — and the slice you keep.

How capital gains tax works on the sale of a rental property

Selling a rental is not like selling stock. The tax bill comes from up to four separate pieces — depreciation recapture, federal long-term capital gains, a 3.8% surtax, and state tax — and the recapture piece surprises almost everyone the first time. Here's how each part is calculated, using 2026 federal figures.

Step 1: Find your total gain

Your taxable gain isn't sale price minus what you paid — it's sale price minus your adjusted cost basis. Start with your original purchase price, add capital improvements (a new roof, an addition — not routine repairs), then subtract all the depreciation you took while renting it. Depreciation lowers your basis, which is exactly why it raises your gain at sale. Then subtract selling costs (agent commissions, closing) from the sale price to get your amount realized. Amount realized minus adjusted basis is your total gain.

Step 2: Depreciation recapture (the surprise)

The portion of your gain equal to the depreciation you deducted over the years is called unrecaptured Section 1250 gain, and it's taxed at a maximum rate of 25% — not the lower capital gains rate. You claimed those deductions against ordinary income while you owned the property; at sale, the IRS takes some of that benefit back. If you deducted $45,000 of depreciation, roughly $45,000 of your gain is taxed at up to 25%, regardless of your capital gains bracket. (If your ordinary rate is below 25%, recapture is taxed at that lower rate instead.)

Step 3: Long-term capital gains on the rest

Whatever gain is left after recapture — your true appreciation — gets preferential long-term capital gains rates if you owned the property more than a year. For 2026 those rates are 0%, 15%, or 20%, and which one applies depends on your total taxable income stacked with the gain:

Sell in under a year and there's no preferential rate at all — the entire gain is short-term, taxed as ordinary income, and there's no separate recapture step because it's already at ordinary rates.

Step 4: The 3.8% net investment income tax

Higher earners owe an extra 3.8% Net Investment Income Tax on the gain. It kicks in when your modified adjusted gross income tops $200,000 (single or head of household), $250,000 (married filing jointly), or $125,000 (married filing separately) — and a big rental sale often pushes you over on its own. These thresholds are not adjusted for inflation, so they catch more sellers every year.

Step 5: State tax

Most states tax capital gains as ordinary income, and a handful (like Florida, Texas, and Washington for most gains) have no such tax at all. Enter your state's rate above; the calculator applies it to the full gain. State treatment varies widely — confirm yours.

The number that shocks people. On a property with a lot of depreciation, recapture can be the biggest single piece of the bill — often larger than the capital gains tax itself. That's the whole reason investors weigh a 1031 exchange, which defers both the recapture and the capital gains tax when you roll the proceeds into another investment property within strict deadlines.

Ways investors reduce or defer this tax

None of these is advice — they're the levers people discuss with their CPA: a 1031 exchange to defer the entire bill into a replacement property; installment sales to spread the gain across years; harvesting capital losses elsewhere to offset the gain; timing the sale for a lower-income year; or, if you convert and genuinely live in the property, exploring the primary-residence exclusion (with limits for periods it was a rental). Which of these fit your situation is a conversation for a tax professional.

Frequently asked

Do I pay capital gains tax if I reinvest the money? Not automatically — simply buying another property with the cash doesn't defer anything. Deferral requires a properly structured 1031 exchange with a qualified intermediary and strict 45-day and 180-day deadlines.

Is depreciation recapture avoidable by not claiming depreciation? No — the IRS calculates recapture on depreciation "allowed or allowable," meaning you owe it whether or not you actually deducted it. Skipping depreciation just forfeits the deduction while keeping the tax.

Is this calculator's number exact? No — it's a solid estimate using 2026 federal rules and the inputs you provide. It doesn't capture every wrinkle (AMT, the precise Schedule D worksheet ordering, passive-loss carryforwards, local taxes, or your full return). Confirm with a CPA before you sell.