Zillow tells you what your rental is worth. Nobody tells you what you'd actually pocket after selling costs, capital gains tax, and the 25% depreciation recapture most landlords discover at tax time — or whether that money works harder in the property or out of it. This tool shows both sides of the decision.
The number that shocks sellers: Every dollar of depreciation you claimed (or could have claimed) gets taxed at up to 25% when you sell. A landlord who owned 10 years often owes $20,000–$40,000 in recapture tax alone — before regular capital gains tax even starts.
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YOUR SELL VS KEEP ANALYSISStep 1 of 5
Step 1 — Your Property Today
What's the property worth now, and what do you still owe?
Use a realistic market estimate (recent comps, not wishful thinking) and your current mortgage balance.
Current market value
$
Remaining mortgage balance
$
Step 2 — Purchase History (For Taxes)
What did you pay, and how long have you rented it?
These determine your capital gain and accumulated depreciation — the two numbers that drive your tax bill at sale.
Original purchase price (+ improvements)
$
Years used as a rental
Building % (non-land portion)
Step 3 — Rental Performance
What does the rental earn and cost per year?
This determines what "keeping" is actually worth as an investment.
Monthly rent
$
Total annual expenses (mortgage payment, tax, insurance, repairs, management)
$
💡 Include your FULL mortgage payment (principal + interest) here — we're measuring cash in vs. cash out.
Step 4 — Your Tax Situation
Filing status and income — for your capital gains bracket.
Your long-term capital gains rate (0%, 15%, or 20%) depends on your total taxable income.
Filing status
Single
Married (Joint)
Head of Household
Your annual taxable income (excluding this sale)
$
Step 5 — Your Market Outlook
What do you expect this property's value to do over the next few years?
Be realistic — national long-run average appreciation is 3–4%/year. Hot markets can do more; declining ones can go negative.
Flat / Slow (~1%/yr)
Weak local market or aging property
Average (~3%/yr)
Typical long-run appreciation
Strong (~5%/yr)
Growing market, high demand area
Declining (~−2%/yr)
Shrinking market or major local risks
⚠️ Federal taxes only: This calculator estimates federal capital gains tax, depreciation recapture, and NIIT. State capital gains taxes (0–13.3%) are not included and can significantly change the sell-side math in states like California, New York, and New Jersey.
Why "What's My House Worth" Is the Wrong Question
When landlords think about selling, they anchor on the Zillow estimate. But the number that matters is what lands in your bank account after five deductions: selling costs (typically 6–7% including agent commissions), your remaining mortgage, depreciation recapture tax (up to 25% of all depreciation claimed or claimable — IRS "allowed or allowable" rule), federal capital gains tax (0%, 15%, or 20% based on income), and possibly the 3.8% Net Investment Income Tax. On a typical 10-year rental, these deductions routinely consume 30–45% of the apparent "profit."
The keep side has its own hidden number: return on equity. Early in ownership, leverage makes returns high. But as equity grows, the same cash flow represents a shrinking percentage return on the money trapped in the property. A rental producing $6,000/year cash flow on $350,000 of equity is earning 1.7% — less than a savings account. That's when experienced investors either refinance, exchange, or sell.
The 1031 Exchange: The Third Option
If your reason for selling is the property, not the asset class — bad tenants, tired building, wrong location — a Section 1031 exchange defers both capital gains tax AND depreciation recapture by rolling proceeds into another investment property. Strict rules apply: identify replacements within 45 days, close within 180 days, use a Qualified Intermediary, and never touch the cash. Held until death, the deferred gain disappears entirely through stepped-up basis — heirs inherit at market value with zero recapture liability. This is the closest thing to a legal cheat code in real estate taxation (IRC §1031; unchanged by OBBBA).
2026 Numbers This Calculator Uses
Long-term capital gains brackets (Rev. Proc. 2025-32): 0% up to $49,450 taxable income (single) / $98,900 (joint); 15% up to $545,500 / $613,700; 20% above. Unrecaptured Section 1250 gain (depreciation recapture): maximum 25%. NIIT: 3.8% when MAGI exceeds $200,000 single / $250,000 joint. Selling costs estimated at 7% of sale price.
Frequently Asked Questions
Every year you own a rental, you deduct depreciation (about 3.6% of the building value annually). Those deductions reduce your cost basis — so when you sell, the gain attributable to depreciation is taxed separately as "unrecaptured Section 1250 gain" at a maximum 25% rate, higher than the 15% most sellers pay on regular long-term gains. Critically, the IRS applies this whether you actually claimed the depreciation or not ("allowed or allowable"). A landlord with $80,000 of accumulated depreciation owes up to $20,000 in recapture tax — a bill many discover only at tax time.
Partially — and less than most people think. Moving in for 2 years qualifies you for the Section 121 exclusion ($250k single / $500k joint), but two limits apply: gain is prorated between "qualified use" (as your residence) and "non-qualified use" (rental years after 2008), so a decade of rental history means most of the gain stays taxable; and depreciation recapture survives no matter what — the 25% tax on all depreciation claimed after May 6, 1997 cannot be excluded through the move-back strategy. It helps, but it's not the escape hatch it's often sold as.
You sell your rental and roll ALL proceeds into another investment property of equal or greater value, deferring both capital gains tax and depreciation recapture. The mechanics are strict: a Qualified Intermediary must hold the funds (you can never touch them), you must identify replacement properties within 45 days of closing, and you must close on the replacement within 180 days. The deferred tax carries into the new property's basis. Repeat until death, and your heirs receive stepped-up basis — the deferred gains are never taxed. Report on Form 8824.
Return on equity (ROE) measures your annual return (cash flow + appreciation + principal paydown) against the equity trapped in the property — what you'd walk away with if you sold today. It's the honest comparison metric: that equity could be invested elsewhere. Many long-held rentals drift to 3–5% ROE as equity grows, below what a simple index fund historically returns. When ROE falls persistently, the options are: refinance to redeploy equity, 1031 exchange into a better-performing property, or sell. Low ROE isn't automatically a sell signal — but it means the property must justify itself on other grounds.
If your modified adjusted gross income — including the gain from the sale — exceeds $200,000 (single) or $250,000 (married filing jointly), the 3.8% NIIT applies to your net investment income, which includes the taxable gain from the sale. Because a property sale often produces a six-figure gain in a single year, it frequently pushes sellers over the threshold even when their normal income is below it. This calculator checks the threshold using your income plus the projected gain.