The Real Estate Tax Center
Every dollar you keep starts with understanding the tax you'd otherwise owe. This is the map: what a sale or your rental income actually costs in tax, and the strategies and calculators to defer, reduce, or eliminate it — current for 2026.
Real estate is taxed in layers — a capital-gains rate, a depreciation-recapture rate of up to 25%, a 3.8% net investment income surtax, and state tax — and it offers more legal ways to defer or erase those layers than almost any other asset. The Tax Center organizes both halves: first the exposure, then the tools to manage it.
Our Guides are organized by strategy and life goal. The Tax Center is organized by tax outcome — start with what you owe, then move down to defer, eliminate, and shelter. Prefer to talk it through? Reach an advisor anytime.
Four common tax problems and the route through them, in order
Sold or selling at a gain
I want to defer the tax on a sale
Estimate what you'd owe
1031 exchange — defer it all
DSTs — defer it passively
High W-2 or business income
I want to lower my taxable income now
Cost segregation + bonus depreciation
Oil & gas losses vs. W-2 income
Trim the 3.8% NIIT
Worried about recapture
I've depreciated a property for years
How recapture works
Estimate your recapture
Defer recapture into a DST
Estate & legacy
I want my heirs to inherit it potentially tax-free
Step-up in basis & “swap till you drop”
721 UPREIT for divisible heirs
Know what you’d owe
The taxes that hit when you sell — or while you hold. Get these right before you plan around them.
Capital Gains Tax on Real Estate
How the gain is built, the 0/15/20% long-term rates, and why the headline rate is never the whole bill.
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Depreciation Recapture
The layer that surprises investors: the depreciation you took is recaptured at up to 25% — higher than the capital-gains rate.
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The 3.8% Net Investment Income Tax
Who owes the NIIT on real estate gains and rental income, the frozen $200k/$250k thresholds, and how to reduce it.
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Ways to Avoid Capital Gains Tax
The full menu of legal moves to defer or cut the tax on an investment-property sale, compared side by side.
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Reinvest the gain and push the tax bill down the road — sometimes indefinitely
1031 Exchange
Defer capital gains, recapture, and NIIT in full by exchanging into like-kind property. Rules, deadlines, and boot.
Tools: boot calculator · 45/180-day deadline calculator
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Delaware Statutory Trusts
The passive 1031 replacement — fractional interests in institutional property, with the tax deferral preserved.
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Opportunity Zone Funds
Defer almost any capital gain and grow the new investment federally potentially tax-free over 10 years. Now permanent from 2027.
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721 Exchange (UPREIT)
Roll a DST into operating-partnership units of a REIT, tax-deferred — the path to diversified, eventually-liquid ownership.
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Installment Sales (§453)
Take payments over years and pay tax only as you receive them — spreading gain across brackets. Watch the §453A interest.
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Forced sale
§1033 Involuntary Conversion
Lost property to condemnation, eminent domain, or casualty? §1033 defers the gain with a longer, more flexible window than 1031.
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Not sure which fits? We line up 1031, DST, Opportunity Zones, 721, and installment sales side by side — deferral, liquidity, control, and horizon. Compare deferral strategies →
1031 vs. Opportunity Zone? The two most common deferral routes work very differently. See which defers more, longer, and with fewer strings. OZ vs. 1031 →
Some strategies don’t just defer — held long enough, they wipe the tax out entirely
Estate Planning & the Step-Up in Basis
“Swap till you drop”: defer through 1031s for life, and heirs inherit at a stepped-up basis — the deferred tax forgiven.
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potentially tax-free growth
The Opportunity Zone 10-Year Rule
Hold a qualifying OZ investment 10 years and the appreciation on it comes out entirely free of federal capital-gains tax.
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721 UPREIT for Estate Planning
REIT units are easily divided among heirs and also receive a step-up — solving the “one building, three kids” problem.
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The §121 Primary-Residence Exclusion
Exclude up to $250k single / $500k joint of gain on a home — and how it can interact with a prior 1031.
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Shelter income while you hold
Deductions that offset rental — and sometimes ordinary — income year after year.
Cost Segregation
Reclassify a building into shorter-life components to front-load depreciation — supercharged now that 100% bonus depreciation is permanent.
Tools: cost-segregation savings calculator
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Intangible Drilling Costs (IDCs)
Deduct 60–80% of a drilling investment in year one — one of the few deductions that can offset active and W-2 income.
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The Depletion Allowance
Shelter a slice of royalty and working-interest income every year through percentage depletion.
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Oil & Gas Losses vs. W-2 Income
Why a working interest is a rare non-passive activity — letting losses offset salary and business income.
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How Private REIT Dividends Are Taxed
Ordinary vs. qualified vs. return-of-capital, and the 20% §199A deduction that lowers the rate on REIT dividends.
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Real Estate Tax Forms & Reporting
What lands in your mailbox and on your return — including why a DST sends a 1099/grantor letter, not a K-1.
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Run your own numbers. All free, all client-side — nothing you enter leaves your browser
Capital Gains Tax Estimator New
Federal long-term rate + 3.8% NIIT + up-to-25% recapture + state, on a property sale, for 2026.
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Depreciation Recapture Calculator New
Split your gain into the recaptured (up to 25%) and capital-gains portions and see the tax on each.
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Cost Segregation Savings Calculator New
Estimate the first-year deduction and tax savings from a study, with 100% bonus depreciation.
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1031
See whether your exchange creates taxable boot from cash or debt relief — and how much.
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1031
Enter your closing date to get your identification and exchange-completion deadlines
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Looking for 1031, boot, debt-replacement, passive-income, or mineral tools too? Browse all calculators →
Tax forms & filing
The paperwork side — what to expect, who issues it, and how each item is reported.
Real Estate Tax Forms, Explained
Form 8824 (1031), 8997 + 8949 + Schedule D (OZ), Form 4797, Schedule E, and K-1 vs. the DST 1099 / grantor letter.
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Opportunity Zone Tax Forms
Electing deferral on Form 8949, tracking the investment on Form 8997, and what the QOF reports to you each year.
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Dates and law changes worth tracking
Dec 31, 2026 — Original OZ deferral ends Capital gains deferred under the 2017 Opportunity Zone rules are recognized on your 2026 return (filed in 2027), regardless of when you invested.
Jan 1, 2027 — Opportunity Zones become permanent OZ 2.0 begins: a permanent program with a rolling five-year deferral and a single 10% basis step-up (30% for qualifying rural funds).
Now permanent — 100% bonus depreciation The 2025 tax law restored full first-year bonus depreciation for property placed in service after Jan 19, 2025 — making cost segregation more valuable than it has been in years.
45 & 180 days — the 1031 clocks From your sale closing, you have 45 days to identify and 180 days to close replacement property. These statutory deadlines are not extended for weekends or holidays.
Ready to act? Our Strategies pages cover how Baker 1031 works in each area, plus current offerings for accredited investors. View Strategies →
Want a second set of eyes? Send us your numbers and goals and we’ll sketch the deferral options before you ever talk to a salesperson. Talk to an advisor →