Start with adjusted basis, not original purchase price
Adjusted basis generally begins with cost and changes for capitalized acquisition costs, improvements, credits, casualties, depreciation allowed or allowable, and other adjustments. Enter a basis already updated through the sale date; entering both original cost and separate improvements is not supported on this focused page.
Selling costs reduce amount realized when they are properly allocable to the sale. Loan payoff does not reduce gain and is excluded from the tax formula, although it changes the cash a seller receives at closing.
Holding period changes the rate path
The model treats a holding period longer than 12 months as long term. At 12 months or less it applies the entered short-term ordinary rate to all modeled taxable gain rather than applying separate long-term and unrecaptured section 1250 rates.
For a long-term scenario, depreciation-related gain uses the entered recapture or unrecaptured-gain rate and the remaining taxable capital gain uses the entered long-term rate. The inputs are rates, not predictions; determine them from the complete return.
Section 121 does not erase depreciation-related gain
A qualifying principal-residence sale can exclude up to $250,000 of gain, or up to $500,000 for many qualifying joint returns. The ownership and use tests generally require two years during the five-year period ending on the sale, along with other conditions. Enter 1 only after those tests and the prior-sale rule have been checked.
Gain equal to depreciation allowed or allowable for rental or business use after May 6, 1997, cannot be excluded under section 121. The calculator therefore applies the home-sale cap only to gain remaining after the entered depreciation-related amount.
NIIT and state tax are separate assumptions
The 3.8% net investment income tax depends on modified adjusted gross income and the character of the activity. Enter 0 when it does not apply or 3.8 for a screening scenario, then enter only the portion of taxable gain exposed after the MAGI threshold and other Form 8960 limits. The calculator caps NIIT at that amount.
State treatment varies in rates, exclusions, depreciation adjustments, residency, withholding, and local tax. The state field simply applies one entered percentage to modeled taxable gain and cannot reproduce a state return.
Use net proceeds as a reconciliation line
Net proceeds here equal sale price less entered selling costs and estimated taxes. They do not subtract the mortgage payoff, prorations, escrow items, repairs, or other closing cash flows, so compare the result with a settlement statement rather than treating it as cash to the seller.
Preserve the linked scenario and review basis, depreciation records, residence-use dates, holding period, tax rates, and state treatment with a qualified preparer. Form 4797, Schedule D, Form 8949, and Form 8960 may all be relevant.
Reviewed methodology and sources
The methodology is reviewed for the stated version. The result remains a scenario estimate and depends on the inputs and applicable rules.
Real Estate Capital Gains Tax Calculator FAQ
Is capital gain sale price minus purchase price?
Usually not. Gain uses amount realized minus adjusted basis. Basis can include capitalized costs and improvements and is reduced by depreciation allowed or allowable and other adjustments.
Why does the calculator ask for holding months?
A holding period longer than 12 months generally follows the long-term path. Twelve months or less uses the entered short-term ordinary rate in this model.
Can section 121 exclude rental depreciation?
No. Gain attributable to depreciation allowed or allowable for rental or business use after May 6, 1997, is not eligible for the section 121 exclusion.
Who can use the $500,000 section 121 cap?
Many married taxpayers filing jointly can qualify, but additional ownership, use, and prior-exclusion tests apply. Enter 1 only after confirming joint-return eligibility.
Does the result include mortgage payoff?
No. Debt payoff changes closing cash but generally does not reduce taxable gain, so it is excluded from the displayed net-proceeds line.
Continue the property analysis
Compare this result with adjacent metrics, keeping each formula’s income, expense, and financing scope consistent.