Real Estate Tax Calc
Why Nevada changes the math: no state income tax
Most states levy their own income tax on capital gains from investment property, requiring a nonresident return for property sold in that state. Nevada is one of only a handful of states — alongside Texas, Florida, South Dakota, Wyoming, Alaska, and Washington — that impose no state income tax at all. That means:
- No Nevada state return is required for the year of sale.
- No state capital gains rate on top of your federal rate.
- No state depreciation recapture to track separately.
The practical result: a Nevada rental seller's entire tax calculation happens on the federal return. If you live in a no-income-tax state like Nevada itself, your bill stops there. If you are a nonresident owner — say, a California resident who owns a Las Vegas rental — Nevada still collects nothing, but your home state (California in this example) taxes the gain under its own rules and typically allows a credit for taxes paid to other states. Since Nevada takes nothing, California offers no credit and taxes the full gain.
Federal long-term capital gains rates
To qualify for long-term capital gains rates, you must have held the rental property for more than 12 months before the sale. Short-term gains (held 12 months or fewer) are taxed as ordinary income at rates up to 37%. For a typical rental held several years, the long-term rates apply.
The 2026 long-term capital gains tax brackets for the §1231 gain portion (above the §1250 recapture) are:
- 0% — Taxable income up to $47,025 (single) / $94,050 (married filing jointly)
- 15% — Taxable income $47,026–$518,900 (single) / $94,051–$583,750 (MFJ)
- 20% — Taxable income above those thresholds
These thresholds are for 2026 and are adjusted for inflation annually. Most middle-income rental investors land in the 15% bracket for their §1231 gain. High earners with large rental portfolios may hit the 20% rate.
Depreciation recapture: the separate 25% bite
Every year you hold a rental, you depreciate the building (not the land) on Schedule E. Residential rental property depreciates over 27.5 years; commercial property over 39 years. When you sell, all depreciation you claimed (or were allowed to claim — the IRS recaptures it even if you forgot to take it) is recaptured as unrecaptured §1250 gain and taxed at a maximum federal rate of 25%, regardless of your bracket.
This recapture sits on top of, and is computed before, the long-term capital gain calculation. The structure is:
- Total gain = Amount realized (sale price minus selling costs) minus Adjusted basis
- Unrecaptured §1250 gain = Total accumulated depreciation (taxed at max 25%)
- Remaining §1231 gain = Total gain minus §1250 gain (taxed at 0/15/20%)
Even investors in the 15% capital gains bracket pay 25% on their depreciation recapture. The only ways to avoid recapture are a 1031 exchange (defers it), death (the step-up in basis eliminates it for heirs), or charitable donation (the deduction offsets it).
The 3.8% Net Investment Income Tax (NIIT)
The Net Investment Income Tax under IRC §1411 is a 3.8% surtax on net investment income for taxpayers above the MAGI thresholds: $200,000 (single) or $250,000 (married filing jointly). Both the §1231 gain and the §1250 recapture amount count as net investment income for a passive rental seller. So does ongoing rental income during the holding period.
The NIIT applies to the lesser of (a) net investment income or (b) the amount by which MAGI exceeds the threshold. If your MAGI is $350,000 (MFJ) and you have $80,000 of gain from the Vegas rental, the NIIT applies to the full $80,000: 3.8% × $80,000 = $3,040 in additional tax. High-income investors should layer this on top of the federal rates calculated above.
Worked example: selling a Las Vegas rental after 7 years
Facts: You bought a Las Vegas single-family rental in 2019 for $320,000, allocated between land ($80,000) and building ($240,000). You held it as a rental for 7 years, claiming straight-line depreciation throughout. You are married filing jointly with $180,000 of W-2 income.
Step 1 — Calculate accumulated depreciation (basis of depreciation):
Annual depreciation: $240,000 ÷ 27.5 years = $8,727/year
7 years × $8,727 = $61,091 accumulated depreciation
Step 2 — Calculate adjusted basis:
Original purchase price: $320,000
Less accumulated depreciation: −$61,091
Adjusted basis: $258,909
Step 3 — Calculate gain:
Sale price: $465,000
Less selling costs (commissions + closing costs at ~6%): −$27,900
Amount realized: $437,100
Total gain: $437,100 − $258,909 = $178,191
Step 4 — Allocate between §1250 recapture and §1231 gain:
Unrecaptured §1250 gain: $61,091 (all accumulated depreciation)
Remaining §1231 gain: $178,191 − $61,091 = $117,100
Step 5 — Calculate federal tax:
Your taxable income with $180,000 wages plus the $117,100 §1231 gain puts you in the 15% long-term capital gains bracket.
Tax on §1250 recapture: $61,091 × 25% = $15,273
Tax on §1231 gain: $117,100 × 15% = $17,565
NIIT: total gain $178,191 × 3.8% = $6,771 (MAGI of roughly $358,000 exceeds $250,000 threshold)
Total estimated federal tax on sale: $39,609
Nevada state tax: $0.
By comparison, a California resident selling the same property would owe California income tax on the entire $178,191 gain at their marginal California rate (up to 13.3%), adding roughly $12,000–$23,700 in state tax on top of the federal bill — a meaningful difference that makes Nevada a significantly lower-tax environment for rental property exits.
Strategies to reduce capital gains on a Las Vegas rental sale
1031 Exchange. The most powerful deferral tool. Reinvest the proceeds into another investment property — anywhere in the U.S. — and defer all federal capital gains and depreciation recapture. You have 45 days to identify replacement property and 180 days to close. Nevada's absence of state tax makes the deferred gain entirely federal, which simplifies the exchange analysis.
Installment sale. Under IRC §453, you can spread gain recognition over the years you receive payments when you seller-finance part of the proceeds. Each year's payment carries a proportionate share of gain, deferring tax. Depreciation recapture, however, is fully recognized in the year of sale even under the installment method, so this strategy defers only the capital gain portion.
Opportunity Zone reinvestment. If you invest the capital gain (not the full proceeds — just the gain amount) in a Qualified Opportunity Zone Fund within 180 days, you can defer the gain until 2026 or the fund exit, and potentially exclude appreciation earned inside the fund if held 10+ years. With the opportunity zone program now in a renewal cycle, check current fund availability and IRS guidance before relying on this strategy.
Primary residence exclusion. If you lived in the Las Vegas home as your primary residence for at least 2 of the 5 years before sale, you may exclude up to $250,000 of gain ($500,000 married). The exclusion does not apply to depreciation recapture — that portion is always taxed. This strategy requires converting the rental to a primary residence before sale, which triggers the passive-to-active conversion and starts the 2-year clock.
Cost segregation study before sale. If you never did a cost segregation study during the holding period, completing one now (before the sale closes) and filing Form 3115 to claim the catch-up adjustment can reclassify some prior building depreciation into 5-, 7-, and 15-year components. This can generate ordinary losses (via bonus depreciation catch-up) that offset the recapture income, lowering your net tax in the sale year.
How the sale is reported: Form 4797 and Schedule D
Rental property sales go on Form 4797 (Sale of Business Property), specifically Section I (§1231 gains held more than 12 months). The IRS reconciles the total gain between the §1250 recapture amount and the §1231 gain. The §1231 net gain from Form 4797 flows to Schedule D, where it is taxed at the preferential long-term capital gains rates. The unrecaptured §1250 portion is tracked on the Unrecaptured Section 1250 Gain worksheet within Schedule D and taxed at the 25% maximum rate.
If you have prior-year suspended passive losses from the Vegas rental (from years the passive-activity rules limited your deductions), those suspended losses are released in full in the year of sale and offset the gain dollar-for-dollar as ordinary losses before capital gain rates apply.
Frequently asked questions
Does Nevada have a capital gains tax on rental property?
No. Nevada has no state income tax and no state capital gains tax. When you sell a Las Vegas rental, you owe only federal capital gains tax — the long-term rate of 0%, 15%, or 20% on the §1231 gain, up to 25% on accumulated depreciation recapture (§1250), and 3.8% NIIT if your MAGI exceeds the threshold.
What federal rate applies to capital gains on a Las Vegas rental sale?
Long-term gain (held more than 12 months) on the appreciation portion is taxed at 0%, 15%, or 20% based on your taxable income bracket. Accumulated depreciation is taxed separately as unrecaptured §1250 gain at a maximum federal rate of 25%. The 3.8% NIIT applies on top of those rates for taxpayers above $200,000 (single) or $250,000 (MFJ) in MAGI.
Do I owe Nevada tax if I live in another state but own a Las Vegas rental?
No. Nevada collects no income tax on the gain regardless of your residence. However, your home state (if it has an income tax) generally taxes your worldwide income including out-of-state property gains. California residents, for example, owe California tax on the full gain because there is no Nevada tax to credit against it.
Does a 1031 exchange work for a Las Vegas rental?
Yes. A Las Vegas rental held for investment is like-kind real property under IRC §1031. You can exchange into any other U.S. investment property and defer all federal capital gains and depreciation recapture. The 45-day identification and 180-day closing deadlines apply. Nevada's no-tax status means your deferred gain is purely federal, simplifying the exchange analysis.
Can I use suspended passive losses to offset the gain on my Vegas rental sale?
Yes. Suspended passive losses from the rental — losses that were blocked in prior years by the passive-activity rules — are fully released and deductible in the year you sell. They offset the total gain from the sale before capital gains rates apply, potentially reducing or eliminating both the §1231 gain and the recapture income in the sale year.
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.