Selling real estate

Capital gains tax on selling investment property

When you sell a rental or other investment property, the gain is long-term capital gain, and the part from depreciation is taxed at up to 25%. A 1031 exchange defers it only if you buy more real estate. A structured installment sale under IRC §453 spreads it over the years you choose, with no replacement property.

Check eligibility Try the calculator

Lump sum: one tax yearStructured sale: the years you choose

WHAT BRINGS YOU HERE?

01I'm done being a landlordSell the rentals without buying more property.The landlord's exit → 02My 1031 is falling throughA failed exchange doesn't automatically mean a failed deferral.See your options → 03My home gain is over $500KWhat the exclusion doesn't cover, and what still works.Read more → 04I advise a sellerDepreciation, §1250 ordering and Form 6252 for CPAs.For CPAs →

HOW THE SALE IS TAXED

What decides your tax bill

On a sale of several properties in one year, all of it lands on a single tax return. These six things decide how much you keep.

Capital gain

The appreciation on the property is long-term capital gain, taxed at 0%, 15%, or 20%.

Structured sales for real estate →

Depreciation on the building

Gain from depreciation on the building (unrecaptured §1250 gain) is taxed at up to 25%. In an installment sale it's recognized first, across the early payments.

How recapture is spread →

Appliances and furnishings

Depreciation on appliances, carpet, and furnishings (§1245 property) is taxed as ordinary income in the year of sale, even if you're paid over time.

Rules for landlords →

Net investment income tax

The 3.8% tax usually applies to rental gains once your income passes the threshold, unless you qualify as a real estate professional running the rentals as a business.

How the sale is taxed →

Your mortgage and your basis

The mortgage is paid off from cash at closing, and that cash is taxed in the year of sale. When the mortgage is close to or above your basis, more of the gain lands in year one.

Check before you structure →

State tax

State income tax applies where you live, and sometimes where the property is.

Capital gains tax by state →

THE PROBLEMLump sum, all in one year

20%15%0%

Year 1

Illustration, not to scale. 2026 federal long-term capital gains rates; the 3.8% NIIT may also apply above a threshold. Your bracket depends on filing status and other income.

The problem we solve

Sale price stays the same. What you keep changes.

Try your own numbers

YOUR OPTIONS

Ways to defer the tax on a property sale

Read: Structured sale vs. 1031 exchange →

IRC §453Structured installment saleYou sell, receive scheduled payments over the years you choose, and pay tax on the gain as the payments arrive. No replacement property.How it works for real estate → IRC §10311031 exchangeDefers tax when you exchange into replacement real estate on strict deadlines: 45 days to identify, 180 days to close.Compare with a structured sale → 1031 REPLACEMENTDelaware statutory trustMakes the replacement property passive, but you're locked in for the DST's holding period and don't control when it sells.Compare → TRUSTDeferred sales trustA trust sells the property and pays you over time. Ongoing fees apply, and payments depend on the trust's investments.Compare → REINVESTQualified opportunity zone fundInvesting the gain in a fund within 180 days defers it. Your money is tied to that fund.Opportunity zone vs. installment sale → CARRY THE NOTESeller financingSpreads the gain under the installment method, but makes you a lender to the person who bought your property.Compare →

Also: 1031 deadline calculator Failed 1031 options DST vs. deferred sales trust All strategies compared

BY TYPE OF PROPERTY

Guides for what you're selling

RENTALSSingle-family rentalsThe tired landlord's exit, without a 1031. MULTIFAMILYApartment complexesLarger properties, larger depreciation. YOUR HOMEA home sale over $500KWhat the exclusion doesn't cover. LANDFarmlandCapital gains tax on a farm sale. LANDInherited farmlandStepped-up basis, then what's left to tax. MINERALSMineral rights and royaltiesSell without the one-year tax hit.

BY TIMING

The clock matters more than the property

A structured sale must be in place before you have a right to the money. If the money reaches you first, the deferral is lost.

Before you list

Decide whether you want more real estate or out of real estate. Compare →

Under contract

Planning a 1031? Arrange a structured sale as a backup before closing. Check eligibility →

Inside your 1031 windows

45 days to identify, 180 days to close. Find your dates →

The exchange failed

If the intermediary still holds the money, it can still go to a structured sale. See your options →

BY STATE

Where the property is

New York rentals California Texas ranches Iowa farmland

All 50 state guides →

FOR CPAs AND ADVISORS

Before you structure a property sale

Pull the depreciation history, separate §1245 items, compare the mortgage to adjusted basis, and apply the §1250-first ordering on Form 6252.

Tax treatment →IRC §453 explained →

FAQ

What property sellers ask us

All FAQs →

Can I use a structured installment sale for investment real estate?

Yes. Rental properties, commercial buildings, farmland, and investment land all qualify under IRC §453, provided the property isn't dealer inventory.

Is a structured installment sale better than a 1031 exchange?

Neither is better for everyone. A 1031 exchange is usually the stronger choice if you want to keep owning investment real estate. A structured installment sale is usually the stronger choice if you want to stop owning property or want steady payments.

Do I have to buy another property?

No. That's the main difference from a 1031 exchange. You sell, receive scheduled payments over the years you choose, and pay tax on the gain as the payments arrive under IRC §453.

Can I still set up a structured sale if my 1031 exchange falls through?

Yes, as long as you haven't received the money. If your qualified intermediary still holds the proceeds and you have no right to them yet, the intermediary can send them to the structured sale instead of to you. Once the cash is yours, or available to you, it's too late.

Is depreciation recapture spread out in an installment sale?

Partly. Gain from depreciation on the buildings (unrecaptured §1250 gain) is reported on the installment method but recognized first, at up to 25%. Recapture on appliances, carpet, and furnishings is ordinary income in the year of sale.

What if my mortgage is higher than my basis?

The mortgage is paid off from cash at closing, and that cash is taxed in the year of sale. When the mortgage is close to or above basis, a large share of the gain lands in year one, and a structure helps much less.

Can I use a structured installment sale on a house I flipped?

No. Property held primarily for sale to customers is dealer property and can't use the installment method.

Guarantees depend on the financial strength and claims-paying ability of the issuing insurer. Review any structure with your CPA and attorney.

ELIGIBILITY QUIZ · STEP 1 OF 5