§1250 Recapture Sale 2026 Tax Calculator
When you sell rental real estate in 2026, accumulated depreciation triggers unrecaptured §1250 gain — taxed at a 25% maximum rate per IRC §1(h)(1)(E). Gain above that is long-term capital gain at 0/15/20%, plus a 3.8% Net Investment Income Tax if MAGI exceeds the §1411 threshold.
| Sale price | — |
| Less: selling costs | — |
| Amount realized | — |
| Adjusted basis (orig + improvements − depreciation) | — |
| Gain breakdown | |
| Unrecaptured §1250 gain (depreciation portion) | — |
| Remaining long-term capital gain | — |
| Tax owed | |
| §1250 tax @ 25% (capped) | — |
| LTCG tax at chosen rate | — |
| NIIT (3.8% if MAGI threshold met) | — |
| State capital gain tax (est.) | — |
| Total tax on sale | — |
| Net cash after tax | — |
Selling rental real estate in 2026 triggers two layers of federal tax on gain. The first layer is unrecaptured §1250 gain — straight-line depreciation taken (or allowed) during ownership, taxed at a maximum 25% rate under IRC §1(h)(1)(E). The second layer is normal long-term capital gain on appreciation above original basis, taxed at 0/15/20% based on income, plus a 3.8% Net Investment Income Tax (NIIT) if your MAGI tops the §1411 threshold ($200K single, $250K MFJ).
How §1250 Differs From §1245
IRC §1250 governs depreciable real property — the building, roof, structural shell. Since residential rentals depreciate straight-line over 27.5 years and commercial over 39 years, there is no "excess" accelerated depreciation, so §1250 generally has no ordinary recapture. Instead the gain attributable to depreciation is "unrecaptured §1250 gain" capped at 25%. §1245 governs depreciable personal property (appliances, carpet, 5-year cost-seg components). §1245 recapture is full ordinary income up to accumulated depreciation — up to 37%. If you did a cost segregation study, expect both §1245 and §1250 at sale.
Adjusted Basis Math
Adjusted basis = original purchase price + capital improvements − accumulated depreciation − casualty losses. Selling costs (commissions, title, transfer taxes) reduce the amount realized. Gain = amount realized − adjusted basis. The portion of gain equal to accumulated depreciation is unrecaptured §1250; the rest is regular long-term capital gain. Watch-out: depreciation "allowed or allowable" — even if you failed to claim it, the IRS treats you as if you had under §1016(a)(2). You can recapture depreciation you never deducted.
3.8% NIIT and State Tax
The Net Investment Income Tax (3.8% per IRC §1411) applies to the lesser of net investment income or MAGI over the threshold. Real estate gains, except those from a §469 "trade or business of real estate" with material participation, are subject to NIIT. State capital gain tax stacks on top — California treats all gain as ordinary income up to 13.3%, New York 10.9%, Hawaii 11%. Tax-friendly states (FL, TX, NV, WA, WY, AK, SD, TN, NH) impose no state capital gain tax. Deferral options: 1031 like-kind exchange defers both §1250 recapture and NIIT; installment sales spread the gain over years; Opportunity Zone investments defer and partially eliminate gain. Consult a CPA before closing. Last updated May 2026.