Rental Property Sale Tax & Recapture Calculator
See how sale allocations, depreciation and debt payoff change your tax reserve and closing cash. Use a transparent model with visible assumptions and a worked example.
Estimate the tax reserve before you sell
Use separate allocations for land, the straight-line building and Section 1245 assets. The model distinguishes ordinary-income recapture from building-depreciation gain and remaining long-term gain. Debt payoff changes closing cash, not the gain calculation.
Scope: an illustrative individual-owner federal scenario for a fully taxable cash sale of rental assets held more than one year, plus an optional flat state rate. It does not calculate final liability, suspended-loss releases, the Section 1231 lookback, exchanges, installment reporting, entity-level taxes or additional Section 1250 ordinary recapture.
Your rental sale scenario
Rounded to the nearest dollar for display. This is a scenario estimate, not a completed tax-return calculation.
- Net amount realized before debt payoff
- Total adjusted basis
- Modeled taxable gain
- Section 1245 ordinary-income recapture
- Unrecaptured Section 1250 gain
- Remaining modeled long-term gain
- Federal tax on Section 1245 recapture
- Federal tax on building depreciation gain
- Federal tax on remaining gain
- NIIT scenario amount
- Modeled federal tax including selected NIIT
- Flat-rate state tax scenario
- Total modeled tax reserve
- Cash after selling costs and debt, before tax
- Cash after modeled tax reserve
A negative cash-after-tax figure indicates the modeled reserve exceeds closing cash. It is not a tax refund or a determination of your final liability.
Bring the allocation, depreciation schedules and proposed closing statement to a sale planning discussion.
Worked example: $900,000 sale with three asset classes
The prefilled example allocates $180,000 of sale price to land, $650,000 to the building and $70,000 to Section 1245 assets. Allocated selling costs total $50,000. Pre-depreciation basis totals $700,000; allowed or allowable depreciation totals $180,000.
| Asset | Net amount realized | Adjusted basis | Gain |
|---|---|---|---|
| Land | $170,000 | $100,000 | $70,000 |
| Building | $615,000 | $400,000 | $215,000 |
| Section 1245 assets | $65,000 | $20,000 | $45,000 |
Total gain is $330,000: $45,000 of Section 1245 recapture, $100,000 of unrecaptured Section 1250 gain and $185,000 of remaining modeled long-term gain. At the example rates of 37%, 25% and 20%, federal tax before NIIT is $78,650. A $300,000 debt payoff leaves $550,000 before tax and $471,350 after that modeled federal reserve, with NIIT off and state tax at zero.
How the model calculates your scenario
- For each asset: net amount realized = allocated sale price − allocated selling costs.
- Adjusted basis = basis before depreciation − depreciation allowed or allowable.
- Gain = net amount realized − adjusted basis. The model stops when an individual asset has a loss because loss netting requires additional return-level analysis.
- Section 1245 ordinary recapture = the smaller of that asset group’s gain or depreciation. Remaining gain enters the modeled long-term category under the stated Section 1231 assumptions.
- For the straight-line building, unrecaptured Section 1250 gain = the smaller of building gain or depreciation. Remaining building gain and land gain enter the modeled long-term category.
- Apply the selected rates to each category, then add the optional NIIT scenario and flat state estimate.
- Closing cash = net amount realized − debt payoff. Cash after the reserve subtracts modeled tax from closing cash.
The asset rows aggregate only assets with compatible treatment and nonnegative individual gains. A gain on one appliance and a loss on another should not be hidden by entering only a combined number. Return-level calculations may differ because of other gains, losses, deductions and rate stacking.
What to review before relying on a sale estimate
Cost segregation history
Reconcile each disposed asset to its tax classification, remaining basis and sale allocation. Certain land improvements or accelerated real property do not fit the simple building or Section 1245 categories used here.
Loss carryforwards
Suspended passive losses and prior Section 1231 losses can change tax character or total liability. The calculator does not release carryforwards or apply the five-year lookback.
Ownership and transaction form
A partnership-interest sale, corporate owner, 1031 exchange, related-party transaction or installment sale requires a different analysis. Use this model only within its stated assumptions.
Tax versus cash
Loan payoff reduces cash available at closing. It generally does not reduce realized gain in this cash-sale model. An owner can have a substantial taxable gain and limited cash after debt service.
Rental sale calculator questions
Is all depreciation recapture taxed at 25%?
No. Section 1245 recapture is generally ordinary income. Unrecaptured Section 1250 gain is a separate category subject to a maximum federal rate of 25%. Other gain may receive different treatment, and other facts can change the result.
Should I enter depreciation claimed or depreciation I should have claimed?
Reconcile depreciation allowed or allowable with your preparer. Missing depreciation can still affect basis and sale treatment; do not assume unclaimed depreciation leaves basis unchanged.
Does the calculator decide whether I owe NIIT?
No. The optional 3.8% amount is a sensitivity scenario on all modeled gain. Actual net investment income tax requires a return-level calculation involving income, thresholds and activity facts.
Are my amounts sent to AE?
The calculator runs in your browser and its code does not transmit or save the entered amounts. You can print the scenario using your browser. Contact AE separately if you want a review.
Plan the next property decision
Primary references: IRS Publication 544: asset sales, recapture and Section 1231, Publication 551: basis of assets and net investment income tax guidance. Method reviewed against these sources October 24, 2026.
Start with the decision and the records.
Tell us the entities, properties or income sources involved, the tax years to address and any approaching deadlines. We will discuss fit and define the work in writing before an engagement begins.
Published by AE Tax Advisors · Updated October 24, 2026. General educational and service information. Your signed engagement defines the work, responsible professionals and fees. Tax treatment depends on your facts and the applicable tax year.
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