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Capital Gain Comparison

This Capital Gains Tax Calculator is designed to provide an estimation of potential taxes owed in a taxable sale, as compared to a 1031 Exchange. It is intended for illustrative purposes only. To avoid paying tax when conducting a 1031 Exchange, the property you purchase must be at least equal in value to the property you sell (Net Sale), and you must reinvest all the cash you receive (Net Cash Received). If you withdraw any cash or acquire property of lesser value, the difference is deemed a recognized gain and will be subject to tax. 

Calculating taxes is complex and involves many factors, and this estimator may not include all variables relevant to your specific situation. Therefore, it is important to consult with your tax or legal advisors for a more accurate assessment. Please note that 1031 Exchange Place does not guarantee or vouch for the accuracy of the calculations, responses, or information provided by this tool.

As you modify any input in the fields below, the calculator will instantly update the displayed results.

1031 Exchange

Subject to no capital gain tax, no tax on depreciation recapture, no state tax, and no NII tax
Tax Capital Gain *
Tax on Depreciation Recapture **
State Tax Capital Gain ***
Total Hypothetical Taxes
Net Amount for Reinvestment

Hypothetical Taxpayer 1

Subject to a 15% tax capital gain, 25% tax on depreciation recapture, state tax, and 0% NII tax
15% Tax Capital Gain *
25% Tax on Depreciation Recapture **
State Tax Capital Gain ***
0% NII Tax
Total Hypothetical Taxes
Net Amount for Reinvestment

Hypothetical Taxpayer 2

Subject to a 20% tax capital gain, 25% tax on depreciation recapture, state tax and 3.8% NII tax
20% Tax Capital Gain *
25 %Tax on Depreciation Recapture **
State Tax Capital Gain ***
3.8% NII Tax
Total Hypothetical Taxes
Net Amount for Reinvestment

The capital gain tax on appreciation in value goes up from 15% to 20% when “Taxable Income” exceeds $492,301 (single) or $553,851 (married filing jointly). (2023 amounts)

The Net Investment Income (NII) tax is applicable when the Taxpayer’s “Adjusted Gross Income” exceeds $200,000 for a single Taxpayer or $250,000 for married Taxpayers filing jointly. Read more on if this applies to you here.

See 2023 state tax rates here.

See a more in-depth analysis of a 1031 Exchange vs taxable sale.

How High Are your State Income Tax Rates?

Forty-three states in the U.S. impose individual income taxes. Of these, forty-one states tax income from wages and salaries. However, New Hampshire only taxes income from dividends and interest, while Washington State only taxes income from capital gains. Meanwhile, seven states do not impose any individual income tax.

States that tax wages have different tax structures. Eleven states use a single-rate tax system, where the same rate applies to all taxable income. On the other hand, 30 states and the District of Columbia have graduated-rate income tax systems, where tax rates increase as income increases. The number of tax brackets varies widely among these states. For example, Kansas has a three-bracket system, while Hawaii has 12 brackets. The top marginal tax rates range from 2.5 percent in Arizona to 13.3 percent in California.

In some states, several tax brackets are concentrated within a narrow income range. For instance, in Georgia, taxpayers reach the state’s highest, sixth bracket at only $7,000 in taxable income. In contrast, in other states, the highest tax rate applies only to higher levels of income. In California, Massachusetts, New Jersey, New York, and the District of Columbia, for instance, the top tax rate starts at or above $1 million, including California’s “millionaire’s tax” surcharge.

Does the NII (Net Investment Income Tax – Affordable Care Act) Apply to You?

Starting January 1, 2013, individuals with investment income might be required to pay a Net Investment Income Tax (NIIT). The tax rate is 3.8%, applied to either their net investment income or the excess of their modified adjusted gross income over the set threshold based on their filing status – whichever is lower.

Here are the statutory threshold amounts based on filing status:

  • Married filing jointly – $250,000
  • Married filing separately – $125,000
  • Single or head of household – $200,000
  • Qualifying widow(er) with a child – $250,000

Net investment income typically encompasses items like interest, dividends, capital gains, rental and royalty income, and non-qualified annuities. However, it generally does not cover wages, unemployment compensation, Social Security Benefits, alimony, and most self-employment income.

Importantly, net investment income does not account for any gains from selling a personal residence that are exempt from gross income for standard income tax purposes. Any gains excluded from gross income for regular tax purposes are not subject to NIIT.

To report and pay the NIIT, individuals need to fill out Form 8960. Instructions for Form 8960 offer guidance on calculating the amount of investment income subject to the tax.

Please note, individuals who do not withhold or make sufficient quarterly estimated tax payments, including NIIT, may be liable for an estimated tax penalty.