Selling a rental can trigger several taxes at once. Knowing them in advance helps you plan and potentially defer them.
What you owe
Gain equals sale price minus selling costs and adjusted basis, which is purchase price plus improvements minus depreciation. Depreciation previously claimed is taxed up to 25% as unrecaptured section 1250 gain, remaining gain at long-term capital gains rates, and the 3.8% net investment income tax may apply.
1031 exchanges
A section 1031 like-kind exchange allows you to defer taxes by reinvesting proceeds in another qualifying investment property. Strict deadlines apply: identify a replacement within 45 days and close within 180 days, using a qualified intermediary.
Other strategies
Hold until death for a stepped-up basis, offset gains with losses, use installment sales or invest in opportunity zones. Work with a CPA before listing the property, since structure matters before the contract is signed.
Try the numbers
Use our Rental Property Sale Tax Calculator to see this in practice. With its default example (Sale price: $650,000; Selling costs: $40,000; Purchase price: $380,000), it shows estimated federal tax: $53,750. Adjust the inputs to match your situation.
Key takeaways
- Depreciation is recaptured at up to 25%.
- 1031 exchanges defer tax with strict deadlines.
- Plan with a CPA before you sell.
This article is for general education and is not personalized financial, tax or legal advice. Rules and limits change; confirm current figures with official sources such as IRS.gov, SSA.gov and StudentAid.gov, or consult a qualified professional. © 2026 FinanzCalc.