Real Estate Capital Gains Calculator — United States

Under IRC §121, you can exclude up to $250,000 of capital gains on your primary residence from federal tax ($500,000 if married filing jointly). To qualify: you must have owned the home for at least 2 of the last 5 years and lived in it as your primary residence for at least 2 of the last 5 years. The exclusion cannot be used more than once every 2 years.

If you sell real estate held for 1 year or less, gains are short-term and taxed at your ordinary income tax rate (up to 37%). If held for more than 1 year, gains are long-term and taxed at preferential rates: 0% (income below ~$47,000 single / $94,000 married), 15% (most taxpayers), or 20% (income above ~$492,000 single / $553,000 married). High earners also face a 3.8% Net Investment Income Tax.

When you sell a rental property, the IRS 'recaptures' the depreciation deductions you claimed over the years and taxes them at a maximum rate of 25% (Section 1250 recapture). For example, if you claimed $80,000 in depreciation, up to $80,000 of your gain is taxed at 25% regardless of your normal capital gains rate. This is a frequently overlooked tax cost on rental property sales.