Capital Gains Calculator

Realty Exchange Corporation has created this simple Capital Gains Calculator and Analysis Form to estimate the tax impact if a property is sold and not exchanged, and to calculate the reinvestment requirements for a tax-deferred exchange. See below for an example and explanation.

A PDF version of our Capital Gains calculator is available below if you would like to have something that you can use offline. The Capital Gains Calculator requires Acrobat Reader 4.0 or higher. Please upgrade your Acrobat Reader for free using this link.
Open the Gain Calculator as a PDF

Fill in the fields below with your numbers and the calculator will generate an estimate of your results:

A. Taxable Gain if property is sold:
1.	SELLING PRICE
2.	Subtract Selling Costs	+
3.	ADJUSTED SELLING PRICE	=
4.	ORIGINAL COST BASIS
5.	Add Improvements
6.	COST BASIS + IMPROVEMENTS
7.	Subtract All Depreciation Authorized/Taken
8.	ADJUSTED BASIS (subtract from Line 3)	=
9.	TOTAL TAXABLE CAPITAL GAIN if property is sold (or deferred if property is exchanged)	=

B. Tax on Gain: (Note 3)
10a.	Capital Gain Tax on Profit (Line 3 less Line 6 × 15%)
10b.	Recapture Section 1250 Depreciation (Line 7 × 25%)	+	1250
11.	Your State Income Tax Rate (Note 5)
12.	ESTIMATED TAX due if property is sold (or amount deferred if exchanged) (Note 6)	=

C. Before and After Tax Proceeds
13.	SELLING PRICE (Line 1)
14.	Subtract Balance Due on All Loans	-
15.	EQUITY	-
16.	Subtract Selling Costs (Line 2)	-
17.	Proceeds Before Tax (cash to escrow in an exchange)	=
18.	Subtract Total Tax Due (Line 12) (Note 6)	-
19.	Net Sale Proceeds After Tax if property is sold	=

D. Exchange Reinvestment Requirements
For deferral of all gain, the replacement propertiy(ies) must cost at least (Line 3):
The amount of cash that you must reinvest must be at least (Line 17):
The balance of funds needed to purchase the new property(ies) may be borrowed or new cash.

(1) To estimate selling costs use 8 to 10% of selling price consider discounts or allowances given by seller.
(2) To estimate residential depreciation taken multiply purchase price of property being sold by 3%, times the number of years the property has been rented.
(3) Total taxable gain is the Profit (Line 10a) plus all the Depreciation taken (Line 10b).
(4) Section 1250 property is basically all real estate rental property.
(5) Your state taxes will vary depending on the state. We recommend checking state tax authority websites or consulting a local tax attorney or tax accountant to get an accurate number.
(6) Caution: Your recognized gain may push income above tax thresholds. Capital gain is X 20% if your taxable income is above and you may have to add and pay 3.8% Net Investment Income Tax. (As of 7/2019)

Example and Explanation of the Like-Kind Exchange Analysis:

A rental property has a selling price of $500,000 and will have selling costs of $40,000. The property cost $150,000 when purchased ten years ago. No depreciable improvements have been made. The estimated depreciation taken is $45,000.

A.	Potential Taxable Gain when the Property Sells
1.	Selling Price		$500,000
2.	Subtract: Selling Costs (see Note 1)		-$40,000
3.	Equals: Adjusted Selling Price		$460,000
4.	Original Cost Basis	$150,000
5.	Add: Improvements	+ZERO
6.	Equals: Adjusted Cost Basis	$150,000
7.	Subtract: All Depreciation Taken (see Note 2)	-$45,000
8.	Equals: Tax Basis		-$105,000
9.	Total: Taxable Capital Gain or Loss if the property sold		$355,000

B.	Tax on the Gain if the Property Sells
10A.	Capital Gains Tax on Profit (See Note 6) (Adj Selling Price less Adj Cost Basis)	$310,000 x 15%	$46,500
10B.	Recapture of all Section 1250 depreciation allowed (see Note 4)	$45,000 x 25%	+$11,250
11.	State Income Tax (Note 5) (Example rate is for Virginia)	Tax Rate 5.75% x Line 9	$20,412.50
12.	Total: Total Tax if the property is sold		$78,162.50

C.	Before and After-Tax Proceeds
13.	Selling Price (line 1)	$500,000
14.	Subtract: Balance Due on all Loans	-$100,000
15.	EQUITY	$400,000
16.	Subtract: Selling Costs (Line 2)	-$40,000
17.	Proceeds Before Tax (cash to Escrow in an Exchange)	$360,000
18.	Subtract: Total Tax Due (line 11)	-$78,162.50
19.	Net Sale Proceeds After-Tax if the property sold	$281,837.50

D. Exchange Reinvestment Requirements

For deferral of all gains the replacement property(ies) must cost at least $460,000 (line 3) and the amount of cash reinvested must be at least $360,000.00 (line 17).

The balance of funds needed to purchase the new property(ies) may be borrowed and/or be new cash.
If the new property(ies) cost less than line 3 or the cash reinvested is less than line 16, then the capital gain will be recognized and be taxed on whichever amount of difference is larger (The recaptured Section 1250 depreciation will be taxed first.)

Defenitions

Sale Date:
The date on which the investment property is sold.

Purchase Date:
The date when the purchase of the replacement property(ies) occurs. To qualify for tax deferral, the exchange must be finalized within 180 days following the sale date and comply with all exchange criteria.

Property Description:
An optional short description of the property involved in the exchange.

Adjusted Cost Basis:
The adjusted value of the investment property being sold, which can be determined with the assistance of a tax professional. This value is adjusted based on improvements and allowable deductions made during the ownership period.

Sale Price:
The agreed-upon price for selling the investment property.

Sale Expenses, Commissions, and Exchange Fees:
Costs incurred by the seller during the sale, potentially including commissions, title insurance, closing costs, exchange fees, etc.

Net Sale Proceeds:
The sale price after deducting sale expenses, commissions, and exchange fees.

Net Cash Received:
The net sale proceeds minus any debts or mortgages on the sold property. This amount is transferred to the exchange account and must be entirely reinvested in the purchased investment property to avoid taxes.

Purchase Price:
The agreed-upon price for acquiring the replacement investment property.

Purchase Expenses and Commissions:
Buyer-incurred costs during the purchase, which may cover commissions, title insurance, closing costs, etc.

Net Purchase Cost:
The purchase price after subtracting purchase expenses and commissions.

Net Cash Reinvested:
The net sale proceeds minus any debts or mortgages on the purchased property in the exchange. This amount must exceed the net cash received from the sale to avoid taxation.

Liabilities/Mortgages Deduction:
Deductions for any debts or mortgages on the property.

Recognized Gain:
The taxable portion of the transaction, calculated as the difference between the net sales price and the adjusted cost basis if no 1031 exchange is performed. For a 1031 exchange, it includes any purchase amount lower than the net sale or any cash withdrawn from the net proceeds, often referred to as “boot.”

Basis of Property Sold:
The sum of the original adjusted basis and any purchase amount exceeding the net sale.

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About Us

Since our founding in 1990, Realty Exchange Corporation’s sole mission is to provide qualified intermediary service to real property investors and their advisors for 1031 exchanges.

William Horan is a Certified Exchange Specialist® (CES), the qualified intermediary industry’s prestigious designation. The CES® designation requires years of experience, testing, adherence to a code of ethics and on-going continuing education.