Capital Gains Tax Calculator on Sale of Rental Property

Why rental property capital gains math is different

A capital gains tax calculator on sale of rental property has to do two things a primary-residence calculator doesn't: skip the §121 exclusion entirely, and split your gain into a depreciation-recapture piece (taxed up to 25%) and a standard capital gain piece (taxed at 0/15/20%). Miss the depreciation step and you'll underestimate the tax bill — often significantly, since every dollar of depreciation you claimed while renting the property reduced your basis, and that reduction comes back as taxable gain when you sell.

To calculate capital gains tax on sale of rental property or calculating capital gains tax on sale of rental property correctly, you need five numbers: sale price, selling costs, original purchase price, capital improvements, and — the piece that's easy to forget — total accumulated depreciation claimed over the years you rented it out.

The depreciation recapture step

Per IRS Publication 544, when you sell depreciated real estate at a gain, the portion of that gain equal to your accumulated depreciation is called unrecaptured Section 1250 gain, and it's taxed at a maximum rate of 25% — separate from, and generally higher than, the standard 0/15/20% long-term capital gains rates that apply to the rest of the gain.

One IRS rule that surprises people: depreciation reduces your basis under an "allowed or allowable" standard — meaning if you were entitled to claim depreciation but never actually claimed it on your tax returns, the IRS still treats your basis as if you had. Skipping depreciation doesn't avoid recapture; it just means you paid more tax along the way for nothing. If that applies to you, a CPA can help you catch up via Form 3115 before you sell, rather than losing the deduction entirely.

2026 federal rates for both pieces

Both pieces stack on top of your other taxable income for the year, in this order: your ordinary income first, then the depreciation recapture (up to 25%), then the remaining gain at 0/15/20%. That ordering matters — it's why a large depreciation recapture amount can push the rest of your gain into a higher bracket than it would land in on its own.

The Net Investment Income Tax, and one exception

A 3.8% Net Investment Income Tax applies on top of both pieces once your modified adjusted gross income exceeds $200,000 (single/HOH) or $250,000 (MFJ). One notable exception: if you qualify as a real estate professional under IRC §469(c)(7) and materially participate in the rental as a trade or business, the gain may not be subject to NIIT at all — a fact-specific determination the IRS scrutinizes closely, so document your hours and involvement if you're relying on it.

Short-term rentals: a simpler (worse) answer

If you held the property one year or less, none of the 25%-cap treatment applies — the entire gain, depreciation-related or not, is taxed as ordinary income at your regular marginal rate, up to 37%. There's no version of short-term ownership that benefits from the depreciation recapture cap; it only exists within the long-term capital gains framework.

If this is actually your primary residence

If the property was your primary residence for at least 2 of the last 5 years — even if you rented it out for part of that window — you may still qualify for some or all of the §121 exclusion on the non-depreciation portion of the gain, though the depreciation recapture piece is never excludable. That's a different calculation than this page models; use our Capital Gains Tax Calculator on Sale of Property for a primary-residence sale instead.

Depreciation recapture rules verified against IRS Publication 544 (Sales and Other Dispositions of Assets) and IRC §1(h)(1)(D) (unrecaptured Section 1250 gain), §1250(b)(3) ("allowed or allowable" basis rule), and §1411 (NIIT). This is a planning estimate — actual reporting requires Form 4797 and the Unrecaptured Section 1250 Gain Worksheet in the Schedule D instructions. A CPA should confirm your actual depreciation schedule before you file.