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Quick answer
Capital gains on property = sale price − selling costs − (purchase price + improvements − depreciation). A main home you lived in 2 of the last 5 years is tax-free up to $250,000 of gain ($500,000 married). The rest is taxed at 0%, 15% or 20% if owned over a year (ordinary rates up to 37% if not), depreciation at up to 25%, plus 3.8% NIIT at high incomes and state tax. Example: single, sold for $650,000, bought for $250,000 + $40,000 improvements → $321,000 gain, $71,000 taxable, $10,650 federal tax.
Enter your sale and purchase price to see exactly how much tax you will owe on a home, rental, second home or land sale — layer by layer, with what you keep after tax.
Last updated: · Sources: IRS Rev. Proc. 2025-32, Publication 523, Topic 409, Form 8960 · Home-sale exclusion guide · depreciation recapture · partial exclusion
Plus your buying closing costs
Additions, roof, remodels
6.0% of price ·
More than 1 = long-term
Of the last 5 years
After deductions, without the sale
Only for the cash-to-you figure — it does not change the tax
Estimated tax on this sale
$10,650
3.3% of your $321,000 gain · federal $10,650
Taxable gain
$71,000
You keep after tax
$600,350
| Sale price − selling costs | $611,000 |
| Adjusted basis | −$290,000 |
| Capital gain (long-term, 12 years) | $321,000 |
| Section 121 exclusion | −$250,000 |
| Taxable gain | $71,000 |
| Long-term gain: $71,000 × 15% | $10,650 |
| Total tax | $10,650 |
Where the $650,000 sale price goes
What this means for you
Estimate for tax year 2026. MAGI for the NIIT is approximated as taxable income + standard deduction + taxable gain. State tax uses a flat planning rate; city taxes (e.g. NYC) are not included. Not tax advice.
2026 federal tax including NIIT, plus a state planning rate where noted. Selling costs about 6% of the price.
Single, main home, 12 yrs
Single filer sells a main home bought for $250,000 (plus $40,000 of improvements) for $650,000 after 12 years, with $85,000 of other taxable income.
$10,650
on a $321,000 gain (3.3%) · $71,000 taxable
Married, main home
Married couple sells their home of 15 years for $1,200,000; they paid $420,000 and spent $80,000 on improvements; $150,000 of other taxable income.
$22,616
on a $634,000 gain (3.6%) · $134,000 taxable
Rental with depreciation
Married couple sells a rental bought for $300,000 for $450,000 after 8 years; $80,000 of depreciation was claimed; $120,000 of other taxable income.
$36,288
on a $183,000 gain (19.8%) · $183,000 taxable
Florida second home
Single filer sells a Florida second home that cost $200,000 for $385,000 after 6 years; $75,000 of other taxable income.
$26,299
on a $161,900 gain (16.2%) · $161,900 taxable
California, bought $53k
Single California homeowner sells for $788,470 a home bought decades ago for $53,000; $60,000 of other taxable income.
$118,415
on a $688,162 gain (17.2%) · $438,162 taxable · incl. $40,749 state
NYC, $785k → $2.2M
Single NYC owner sells a home bought for $785,000 for $2,200,000 after 20 years, with $44,000 of other taxable income.
$285,406
on a $1,283,000 gain (22.2%) · $1,033,000 taxable · incl. $70,761 state
Bronx, paid $115k → $1M
Single Bronx owner sells a home bought for $115,000 for $1,000,000 after 25 years; $70,000 of other taxable income; mortgage paid off.
$148,134
on a $825,000 gain (18.0%) · $575,000 taxable · incl. $39,388 state
Flip under 1 year
Single investor buys a house for $280,000, spends $45,000 renovating, and sells 9 months later for $400,000; $90,000 of other taxable income.
$11,926
on a $51,000 gain (23.4%) · $51,000 taxable
Bought 33 years ago
Married couple sells for $520,000 the main home they bought 33 years ago for $90,000, after $40,000 of improvements; $70,000 of other taxable income.
$0
on a $358,800 gain (0.0%) · $0 taxable
Your tax is based on the gain, not the sale price. Work out the gain, remove any home-sale exclusion, then tax what is left in layers stacked on top of your other taxable income.
1. Amount realized
Sale price − selling expenses (commission, title, transfer tax, legal)
2. Adjusted basis
Purchase price + closing costs + improvements − depreciation
3. Gain
Amount realized − adjusted basis
4. Taxable gain
Gain − Section 121 exclusion ($250k / $500k, never covering depreciation)
5. Federal tax
Stack on taxable income: depreciation at ordinary rates ≤ 25%, then 0/15/20% (or ordinary rates if held ≤ 1 year)
6. NIIT + state
3.8% × lesser of taxable gain or MAGI over threshold, plus state rate × taxable gain
| Sale price | $650,000 |
| − Selling costs (6%) | $39,000 |
| = Amount realized | $611,000 |
| − Basis: purchase + improvements | $250,000 + $40,000 = $290,000 |
| = Capital gain | $321,000 |
| − Section 121 exclusion | $250,000 |
| = Taxable gain | $71,000 |
| Federal tax | $71,000 × 15% = $10,650 (income $85,000 + gain stays under $545,500; no NIIT — MAGI ≈ $172,100) |
| You keep | $600,350 after selling costs and tax |
Long-term rates by taxable income including the gain (IRS Rev. Proc. 2025-32). The NIIT threshold uses modified AGI and is not indexed for inflation.
| Filing status | 0% | 15% | 20% | +3.8% NIIT over | Home exclusion |
|---|---|---|---|---|---|
| Single | Up to $49,450 | $49,451 – $545,500 | Over $545,500 | $200,000 | $250,000 |
| Married filing jointly | Up to $98,900 | $98,901 – $613,700 | Over $613,700 | $250,000 | $500,000 |
| Married filing separately | Up to $49,450 | $49,451 – $306,850 | Over $306,850 | $125,000 | $250,000 |
| Head of household | Up to $66,200 | $66,201 – $579,600 | Over $579,600 | $200,000 | $250,000 |
2026 standard deduction: $16,100 single, $32,200 married filing jointly, $24,150 head of household. 2025 thresholds were $48,350 / $533,400 (single) and $96,700 / $600,050 (joint).
Single filer, long-term taxable gain (after any exclusion), no depreciation. Includes the 3.8% NIIT where it applies. Columns are other taxable income.
| Taxable gain | $40,000 income | $85,000 income | $150,000 income | $300,000 income |
|---|---|---|---|---|
| $50,000 | $6,083 12.2% | $7,500 15.0% | $8,112 16.2% | $9,400 18.8% |
| $100,000 | $13,583 13.6% | $15,042 15.0% | $17,512 17.5% | $18,800 18.8% |
| $250,000 | $40,114 16.0% | $43,242 17.3% | $45,712 18.3% | $47,225 18.9% |
| $500,000 | $87,114 17.4% | $92,217 18.4% | $97,937 19.6% | $106,725 21.3% |
| $1,000,000 | $205,839 20.6% | $211,217 21.1% | $216,937 21.7% | $225,725 22.6% |
What you need to exclude up to $250,000 / $500,000 of gain on your main home.
| Exclusion amount | Up to $250,000 (single, head of household, each married-separate spouse) or $500,000 (married filing jointly) |
| Ownership test | Owned the home for at least 2 years (24 months) during the 5 years before the sale |
| Use (main home) test | Lived in it as your main home for at least 2 of the 5 years before the sale — the 2 years need not be continuous |
| $500,000 for couples | Either spouse meets the ownership test, both meet the use test, and neither used the exclusion in the prior 2 years |
| Frequency | Generally once every 2 years |
| Partial exclusion | Sold early because of a job move (50+ miles), health, or an unforeseen event: months qualified ÷ 24 × the limit |
| Depreciation | Depreciation taken after May 6, 1997 (home office, rental years) cannot be excluded — it is taxed up to 25% |
| Does not apply | Second homes, vacation homes, rentals, land, and flips; converted rentals may lose part of the exclusion for nonqualified use after 2008 |
Partial example: sold after 18 months for a job move → 18 ÷ 24 × $250,000 = $187,500 excluded; tax $21,340 instead of $56,590.
The holding period starts the day after you buy. One year or less is short-term.
| Type | Held | Federal rate |
|---|---|---|
| Short-termFlips and quick resales — gain stacks on wages | 1 year or less | Ordinary income rates (10%–37%) |
| Long-termBracket set by total taxable income including the gain | More than 1 year | 0% / 15% / 20% |
| Unrecaptured §1250 (depreciation)Rentals, home offices; taxed before the 0/15/20% layer | More than 1 year | Ordinary rate, capped at 25% |
| Net investment income taxOn taxable gain once MAGI exceeds $200k single / $250k joint | Any | +3.8% |
Inherited property is always long-term. Flip example: $51,000 gain in 9 months → $11,926; held over a year it would be $7,650.
Married filing jointly, $120,000 other taxable income. Bought for $300,000 + $20,000 improvements, $80,000 depreciation over 8 years, sold for $450,000 with $27,000 selling costs. Adjusted basis $240,000 → gain $183,000.
| Layer | Amount | Rate | Tax |
|---|---|---|---|
| Depreciation recapture | $80,000 | 22.0% | $17,600 |
| Long-term gain | $103,000 | 15.0% | $15,450 |
| Net investment income tax | $85,200 | 3.8% | $3,238 |
| Federal total | $183,000 | 19.8% | $36,288 |
The depreciation layer is taxed at the 22% bracket here because it is stacked right after $120,000 of income; in the 32%+ brackets it is capped at 25%. A 1031 exchange into another rental would defer the full $36,288.
| Rate | Single | Married filing jointly | Head of household |
|---|---|---|---|
| 10% | $0 – $12,400 | $0 – $24,800 | $0 – $17,700 |
| 12% | $12,400 – $50,400 | $24,800 – $100,800 | $17,700 – $67,450 |
| 22% | $50,400 – $105,700 | $100,800 – $211,400 | $67,450 – $105,700 |
| 24% | $105,700 – $201,775 | $211,400 – $403,550 | $105,700 – $201,750 |
| 32% | $201,775 – $256,225 | $403,550 – $512,450 | $201,750 – $256,200 |
| 35% | $256,225 – $640,600 | $512,450 – $768,700 | $256,200 – $640,600 |
| 37% | Over $640,600 | Over $768,700 | Over $640,600 |
Taxable income after deductions. Married filing separately matches single up to $256,225, then 35% to $384,350 and 37% above.
Most states tax gains as ordinary income with no special rate. The state where the property is located can tax a nonresident seller; your home state usually credits that tax.
| State | How gains are taxed | Rate |
|---|---|---|
| California | Ordinary income; 3⅓% escrow withholding unless exempt | 13.3% top; 9.3% planning here |
| New York | Ordinary income; NYC adds city tax | 10.9% state + 3.876% NYC top; 6.85% planning |
| New Jersey | Ordinary income; nonresident estimated payment at closing | 10.75% top; 6.37% planning |
| Illinois | Flat income tax on gains | 4.95% flat |
| Virginia | Ordinary income | 5.75% top (over $17,000) |
| Oklahoma | Ordinary income, but Oklahoma real property held 5+ years can be deducted (Form 561) | Often $0 on long-held OK property |
| Washington | No income tax; the state capital gains tax exempts real estate | $0 on property sales |
| Texas, Florida, Nevada, Tennessee, South Dakota, Wyoming, Alaska, New Hampshire | No state income tax on gains | $0 — federal only |
Low-income year? Single filers with taxable income (including the gain) up to $49,450 — $98,900 married — pay 0% on that part of a long-term gain. NIIT starts at $200,000 / $250,000 of MAGI.
More examples of the exclusion in Capital gains tax on a home sale, depreciation recapture, or the partial exclusion. Estimate proceeds with the home sale calculator.
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