846 variables that change what you keep.

12% bracket starts (married filing jointly)

Taxable income above $24,800 is taxed at 12% for married filing jointly filers in 2026.

Why it matters: Sale-year interest, recapture and other ordinary income that lands above this line is taxed at 12% instead of 10%.

Source: Rev. Proc. 2025-32 sec. 4.01

22% bracket starts (married filing jointly)

Taxable income above $100,800 is taxed at 22% for married filing jointly filers in 2026.

Why it matters: Ordinary income above this line is taxed at 22%; spreading a sale can keep more of it in the lower bands.

Source: Rev. Proc. 2025-32 sec. 4.01

24% bracket starts (married filing jointly)

Taxable income above $211,400 is taxed at 24% for married filing jointly filers in 2026.

Why it matters: Above this line ordinary income such as depreciation recapture and note interest is taxed at 24%.

Source: Rev. Proc. 2025-32 sec. 4.01

32% bracket starts (married filing jointly)

Taxable income above $403,550 is taxed at 32% for married filing jointly filers in 2026.

Why it matters: Crossing this line moves recapture and interest from 24% to 32%, a big jump that installment spreading can avoid in later years.

Source: Rev. Proc. 2025-32 sec. 4.01

35% bracket starts (married filing jointly)

Taxable income above $512,450 is taxed at 35% for married filing jointly filers in 2026.

Why it matters: Above this line ordinary income is taxed at 35%; a one-year sale often pushes recapture into this band.

Source: Rev. Proc. 2025-32 sec. 4.01

37% bracket starts (married filing jointly)

Taxable income above $768,700 is taxed at 37% for married filing jointly filers in 2026.

Why it matters: The top rate; one-year sales with large ordinary recapture often reach it, and it also triggers the itemized deduction cap.

Source: Rev. Proc. 2025-32 sec. 4.01

12% bracket starts (single)

Taxable income above $12,400 is taxed at 12% for single filers in 2026.

Why it matters: Sale-year interest, recapture and other ordinary income that lands above this line is taxed at 12% instead of 10%.

Source: Rev. Proc. 2025-32 sec. 4.01

22% bracket starts (single)

Taxable income above $50,400 is taxed at 22% for single filers in 2026.

Why it matters: Ordinary income above this line is taxed at 22%; spreading a sale can keep more of it in the lower bands.

Source: Rev. Proc. 2025-32 sec. 4.01

24% bracket starts (single)

Taxable income above $105,700 is taxed at 24% for single filers in 2026.

Why it matters: Above this line ordinary income such as depreciation recapture and note interest is taxed at 24%.

Source: Rev. Proc. 2025-32 sec. 4.01

32% bracket starts (single)

Taxable income above $201,775 is taxed at 32% for single filers in 2026.

Why it matters: Crossing this line moves recapture and interest from 24% to 32%, a big jump that installment spreading can avoid in later years.

Source: Rev. Proc. 2025-32 sec. 4.01

35% bracket starts (single)

Taxable income above $256,225 is taxed at 35% for single filers in 2026.

Why it matters: Above this line ordinary income is taxed at 35%; a one-year sale often pushes recapture into this band.

Source: Rev. Proc. 2025-32 sec. 4.01

37% bracket starts (single)

Taxable income above $640,600 is taxed at 37% for single filers in 2026.

Why it matters: The top rate; one-year sales with large ordinary recapture often reach it, and it also triggers the itemized deduction cap.

Source: Rev. Proc. 2025-32 sec. 4.01

12% bracket starts (head of household)

Taxable income above $17,700 is taxed at 12% for head of household filers in 2026.

Why it matters: Sale-year interest, recapture and other ordinary income that lands above this line is taxed at 12% instead of 10%.

Source: Rev. Proc. 2025-32 sec. 4.01

22% bracket starts (head of household)

Taxable income above $67,450 is taxed at 22% for head of household filers in 2026.

Why it matters: Ordinary income above this line is taxed at 22%; spreading a sale can keep more of it in the lower bands.

Source: Rev. Proc. 2025-32 sec. 4.01

24% bracket starts (head of household)

Taxable income above $105,700 is taxed at 24% for head of household filers in 2026.

Why it matters: Above this line ordinary income such as depreciation recapture and note interest is taxed at 24%.

Source: Rev. Proc. 2025-32 sec. 4.01

32% bracket starts (head of household)

Taxable income above $201,750 is taxed at 32% for head of household filers in 2026.

Why it matters: Crossing this line moves recapture and interest from 24% to 32%, a big jump that installment spreading can avoid in later years.

Source: Rev. Proc. 2025-32 sec. 4.01

35% bracket starts (head of household)

Taxable income above $256,200 is taxed at 35% for head of household filers in 2026.

Why it matters: Above this line ordinary income is taxed at 35%; a one-year sale often pushes recapture into this band.

Source: Rev. Proc. 2025-32 sec. 4.01

37% bracket starts (head of household)

Taxable income above $640,600 is taxed at 37% for head of household filers in 2026.

Why it matters: The top rate; one-year sales with large ordinary recapture often reach it, and it also triggers the itemized deduction cap.

Source: Rev. Proc. 2025-32 sec. 4.01

37% bracket starts (married filing separately)

Married people filing separately reach the top 37% rate at half the joint threshold.

Why it matters: Filing separately in a sale year can push one spouse's gain-year ordinary income into 37% quickly.

Source: Rev. Proc. 2025-32 sec. 4.01

24% bracket starts (trusts and estates)

A non-grantor trust or an estate pays 24% on ordinary taxable income above $3,300.

Why it matters: Income kept inside a trust or estate (for example an inherited note or a non-grantor trust holding sale proceeds) hits the top rates at tiny amounts.

Source: Rev. Proc. 2025-32, Table 5

35% bracket starts (trusts and estates)

A non-grantor trust or an estate pays 35% on ordinary taxable income above $11,700.

Why it matters: Income kept inside a trust or estate (for example an inherited note or a non-grantor trust holding sale proceeds) hits the top rates at tiny amounts.

Source: Rev. Proc. 2025-32, Table 5

37% bracket starts (trusts and estates)

A non-grantor trust or an estate pays 37% on ordinary taxable income above $16,000.

Why it matters: Income kept inside a trust or estate (for example an inherited note or a non-grantor trust holding sale proceeds) hits the top rates at tiny amounts.

Source: Rev. Proc. 2025-32, Table 5

0% capital gain band ends (married filing jointly)

Long-term gain that fits under $98,900 of taxable income (married filing jointly) is taxed at 0%.

Why it matters: Spreading gain into years with little other income can let part of it fall in the 0% band each year.

Source: Rev. Proc. 2025-32 sec. 4.03

20% capital gain rate starts (married filing jointly)

Long-term gain above $613,700 of taxable income (married filing jointly) is taxed at 20% instead of 15%.

Why it matters: A one-year sale usually puts most of the gain above this line; spreading can keep more of it at 15%.

Source: Rev. Proc. 2025-32 sec. 4.03

0% capital gain band ends (single)

Long-term gain that fits under $49,450 of taxable income (single) is taxed at 0%.

Why it matters: Spreading gain into years with little other income can let part of it fall in the 0% band each year.

Source: Rev. Proc. 2025-32 sec. 4.03

20% capital gain rate starts (single)

Long-term gain above $545,500 of taxable income (single) is taxed at 20% instead of 15%.

Why it matters: A one-year sale usually puts most of the gain above this line; spreading can keep more of it at 15%.

Source: Rev. Proc. 2025-32 sec. 4.03

0% capital gain band ends (head of household)

Long-term gain that fits under $66,200 of taxable income (head of household) is taxed at 0%.

Why it matters: Spreading gain into years with little other income can let part of it fall in the 0% band each year.

Source: Rev. Proc. 2025-32 sec. 4.03

20% capital gain rate starts (head of household)

Long-term gain above $579,600 of taxable income (head of household) is taxed at 20% instead of 15%.

Why it matters: A one-year sale usually puts most of the gain above this line; spreading can keep more of it at 15%.

Source: Rev. Proc. 2025-32 sec. 4.03

0% capital gain band ends (married filing separately)

Long-term gain that fits under $49,450 of taxable income (married filing separately) is taxed at 0%.

Why it matters: Spreading gain into years with little other income can let part of it fall in the 0% band each year.

Source: Rev. Proc. 2025-32 sec. 4.03

20% capital gain rate starts (married filing separately)

Long-term gain above $306,850 of taxable income (married filing separately) is taxed at 20% instead of 15%.

Why it matters: A one-year sale usually puts most of the gain above this line; spreading can keep more of it at 15%.

Source: Rev. Proc. 2025-32 sec. 4.03

0% capital gain band ends (trusts and estates)

Long-term gain that fits under $3,300 of taxable income (trusts and estates) is taxed at 0%.

Why it matters: Spreading gain into years with little other income can let part of it fall in the 0% band each year.

Source: Rev. Proc. 2025-32 sec. 4.03

20% capital gain rate starts (trusts and estates)

Long-term gain above $16,250 of taxable income (trusts and estates) is taxed at 20% instead of 15%.

Why it matters: A one-year sale usually puts most of the gain above this line; spreading can keep more of it at 15%.

Source: Rev. Proc. 2025-32 sec. 4.03

Top long-term capital gain rate

The highest federal rate on long-term capital gain and qualified dividends, before the 3.8% net investment income tax.

Why it matters: Sets the ceiling on the federal income tax on most of a big sale's gain.

Source: IRC 1(h)(1)(D)

Collectibles and partial-exclusion small business stock rate

Gain on collectibles, and the taxable part of a partially excluded Section 1202 stock gain, is taxed at up to 28%.

Why it matters: If part of a business sale is collectibles (art, coins, some inventory of a collector) or a 50%/75% Section 1202 exclusion applies, the non-excluded gain uses the 28% maximum.

Source: IRC 1(h)(4)-(5)

Stacking order of income

Ordinary income fills the brackets first, then unrecaptured Section 1250 gain, then other long-term gain on top.

Why it matters: Because gain sits on top of ordinary income, more salary, interest or recapture in a year pushes the gain into the 15% or 20% bands.

Source: IRC 1(h)(1)

Long-term holding period

Property must be held more than one year for gain to get long-term capital gain rates.

Why it matters: Gain on property held one year or less is short-term and taxed at ordinary rates up to 37%.

Source: IRC 1222(3)

Net investment income tax rate

A 3.8% surtax on investment income, including most gain on investment and rental property and note interest.

Why it matters: Adds 3.8% on top of the capital gain rate for most real estate and passive business sales; spreading can keep some years under the threshold.

Source: IRC 1411(a)(1)

Net investment income tax threshold (married filing jointly)

The 3.8% tax applies to the smaller of net investment income or modified AGI above $250,000 (married filing jointly).

Why it matters: Income under this line in a payment year escapes the 3.8%; the threshold is not indexed, so more sellers cross it every year.

Source: IRC 1411(b)

Net investment income tax threshold (single)

The 3.8% tax applies to the smaller of net investment income or modified AGI above $200,000 (single).

Why it matters: Income under this line in a payment year escapes the 3.8%; the threshold is not indexed, so more sellers cross it every year.

Source: IRC 1411(b)

Net investment income tax threshold (head of household)

The 3.8% tax applies to the smaller of net investment income or modified AGI above $200,000 (head of household).

Why it matters: Income under this line in a payment year escapes the 3.8%; the threshold is not indexed, so more sellers cross it every year.

Source: IRC 1411(b)

Net investment income tax threshold (married filing separately)

The 3.8% tax applies to the smaller of net investment income or modified AGI above $125,000 (married filing separately).

Why it matters: Income under this line in a payment year escapes the 3.8%; the threshold is not indexed, so more sellers cross it every year.

Source: IRC 1411(b)

Net investment income tax threshold (trusts and estates)

A trust or estate pays the 3.8% tax on undistributed investment income above the start of its top bracket.

Why it matters: An estate or trust that holds an installment note or sale proceeds owes the 3.8% on very little income unless it distributes.

Source: IRC 1411(a)(2); Rev. Proc. 2025-32

Active business exception

Gain on property used in a trade or business in which you materially participate is not net investment income.

Why it matters: Selling a business you actively run avoids the 3.8% on the gain, which can shrink the benefit of spreading.

Source: IRC 1411(c)(1)(A)(iii)

Look-through for partnership and S corporation interests

Gain on selling an interest in a partnership or S corporation counts as investment income only to the extent the entity's assets would produce it.

Why it matters: An owner who materially participates can keep most of an entity-interest sale out of the 3.8% tax.

Source: IRC 1411(c)(4)

Real estate professional safe harbor

A real estate professional who spends more than 500 hours in a rental (or did in 5 of the last 10 years) treats its rent and sale gain as business income.

Why it matters: Qualifying in the year of sale can remove the 3.8% tax from the whole rental gain.

Source: Treas. Reg. 1.1411-4(g)(7)

Investment deductions do not carry over

Deductions that exceed investment income in a year are lost for the 3.8% tax; they do not carry to later years.

Why it matters: Freed passive losses are worth more for this tax in a year with big gain than in a quiet year.

Source: Treas. Reg. 1.1411-4(f)(1)(ii)

Additional Medicare tax on wages

Wages and self-employment income above $200,000 ($250,000 joint, $125,000 separate) carry an extra 0.9% Medicare tax.

Why it matters: Sale proceeds paid as consulting or employment compensation (instead of price) pick up this tax; gain does not.

Source: IRC 3101(b)(2)

Self-employment and payroll tax on service payments

Payments for services (consulting, transition work) are wages or self-employment income, taxed for Social Security up to the wage base and for Medicare without limit.

Why it matters: Calling part of the price a consulting fee converts capital gain into income that also carries payroll tax.

Source: IRS Pub. 15 (2026); IRC 1401

AMT exemption (married filing jointly)

The amount of alternative minimum taxable income exempt from AMT for married filing jointly in 2026.

Why it matters: A large sale can phase this exemption out, which can create AMT on ordinary income even though the gain itself keeps its capital gain rate.

Source: Rev. Proc. 2025-32 sec. 4.10

AMT exemption (single and head of household)

The amount of alternative minimum taxable income exempt from AMT for single and head of household in 2026.

Why it matters: A large sale can phase this exemption out, which can create AMT on ordinary income even though the gain itself keeps its capital gain rate.

Source: Rev. Proc. 2025-32 sec. 4.10

AMT exemption (married filing separately)

The amount of alternative minimum taxable income exempt from AMT for married filing separately in 2026.

Why it matters: A large sale can phase this exemption out, which can create AMT on ordinary income even though the gain itself keeps its capital gain rate.

Source: Rev. Proc. 2025-32 sec. 4.10

AMT exemption (trusts and estates)

The amount of alternative minimum taxable income exempt from AMT for trusts and estates in 2026.

Why it matters: A large sale can phase this exemption out, which can create AMT on ordinary income even though the gain itself keeps its capital gain rate.

Source: Rev. Proc. 2025-32 sec. 4.10

AMT exemption phase-out range (married filing jointly)

The AMT exemption shrinks once AMT income passes $1,000,000 and is gone at $1,280,400 (married filing jointly).

Why it matters: Gain counts toward AMT income, so a one-year sale is the classic way to lose the whole exemption; spreading can keep it.

Source: Rev. Proc. 2025-32 sec. 4.10

AMT exemption phase-out range (single)

The AMT exemption shrinks once AMT income passes $500,000 and is gone at $680,200 (single).

Why it matters: Gain counts toward AMT income, so a one-year sale is the classic way to lose the whole exemption; spreading can keep it.

Source: Rev. Proc. 2025-32 sec. 4.10

AMT exemption phase-out range (married filing separately)

The AMT exemption shrinks once AMT income passes $500,000 and is gone at $640,200 (married filing separately).

Why it matters: Gain counts toward AMT income, so a one-year sale is the classic way to lose the whole exemption; spreading can keep it.

Source: Rev. Proc. 2025-32 sec. 4.10

AMT exemption phase-out range (trusts and estates)

The AMT exemption shrinks once AMT income passes $104,800 and is gone at $167,600 (trusts and estates).

Why it matters: Gain counts toward AMT income, so a one-year sale is the classic way to lose the whole exemption; spreading can keep it.

Source: Rev. Proc. 2025-32 sec. 4.10

AMT exemption phase-out rate

Each dollar of AMT income above the phase-out start reduces the exemption by 50 cents (up from 25 cents before 2026).

Why it matters: The faster phase-out makes big sale years more likely to owe AMT than under prior law.

Source: IRC 55(d)(3)

AMT 28% rate threshold

AMT is 26% on AMT income up to this amount after the exemption and 28% above it.

Why it matters: Determines the AMT rate on ordinary income in a sale year once the exemption is gone.

Source: Rev. Proc. 2025-32 sec. 4.10

Capital gain rates inside AMT

Long-term gain keeps its 0/15/20% rates in the AMT calculation.

Why it matters: AMT from a sale comes from the lost exemption and lost deductions, not from a higher rate on the gain itself.

Source: IRC 55(b)(3)

Standard deduction (married filing jointly)

The flat deduction for married filing jointly in 2026 if you do not itemize.

Why it matters: Each payment year gets its own standard deduction, one reason spreading gain over several years lowers the total tax.

Source: Rev. Proc. 2025-32 sec. 4.14

Standard deduction (head of household)

The flat deduction for head of household in 2026 if you do not itemize.

Why it matters: Each payment year gets its own standard deduction, one reason spreading gain over several years lowers the total tax.

Source: Rev. Proc. 2025-32 sec. 4.14

Standard deduction (single or married filing separately)

The flat deduction for single or married filing separately in 2026 if you do not itemize.

Why it matters: Each payment year gets its own standard deduction, one reason spreading gain over several years lowers the total tax.

Source: Rev. Proc. 2025-32 sec. 4.14

Additional standard deduction at 65 (married)

Each spouse 65 or older (or blind) adds to the standard deduction.

Why it matters: Adds deduction room in every payment year for older sellers.

Source: Rev. Proc. 2025-32 sec. 4.14(3)

Additional standard deduction at 65 (unmarried)

An unmarried person 65 or older (or blind) gets a larger add-on.

Why it matters: Adds deduction room in every payment year for a single older seller.

Source: Rev. Proc. 2025-32 sec. 4.14(3)

Senior deduction

A temporary extra deduction of $6,000 for each person 65 or older, for 2025 through 2028.

Why it matters: Worth up to $12,000 to a couple in low-income payment years, but a big sale year phases it out.

Source: IRC 151(d)(5)(C)

Senior deduction phase-out (single)

The senior deduction drops by 6% of modified AGI above $75,000.

Why it matters: Sale-year gain usually wipes it out; spreading can keep it in later years.

Source: IRC 151(d)(5)(C)

Senior deduction phase-out (joint)

On a joint return the 6% phase-out starts at $150,000 of modified AGI; married couples must file jointly to claim it.

Why it matters: A couple loses the full $12,000 at about $350,000 of MAGI, easily reached in a one-year sale.

Source: IRC 151(d)(5)(C)

State and local tax (SALT) deduction cap

The most state income and property tax an itemizer can deduct.

Why it matters: In the sale year the state tax on the gain is large, but the deduction is capped and phases down with income.

Source: IRC 164(b)(7)

SALT cap phase-down threshold

The SALT cap is reduced once modified AGI passes this amount (same for single and joint; half for separate).

Why it matters: A big sale year almost always crosses it, so the state tax on the gain is mostly not deductible.

Source: IRC 164(b)(7)(B)

SALT cap phase-down rate

The cap falls by 30 cents for each dollar of modified AGI over the threshold.

Why it matters: Spreading gain to keep MAGI under the threshold in some years restores up to $30,400 of deduction per year.

Source: IRC 164(b)(7)(B)

SALT cap floor

However high income goes, the SALT cap does not drop below $10,000 ($5,000 married filing separately).

Why it matters: Sets the deduction a big-sale-year itemizer can still count on.

Source: IRC 164(b)(7)(B)

SALT cap reverts after 2029

The higher cap applies for 2025 through 2029; from 2030 the cap returns to $10,000 for everyone.

Why it matters: Payments received from 2030 on get only the $10,000 cap, which changes the state-tax cost of late payment years.

Source: IRC 164(b)(7)(A)(iv)

Itemized deduction cap for the 37% bracket

Itemized deductions are cut by 2/37 of the smaller of the deductions or the income above the 37% bracket start.

Why it matters: Caps the value of a sale-year charitable gift or other itemized deduction at about 35 cents per dollar for top-bracket sellers.

Source: IRC 68(a)

Qualified business income deduction

Owners of pass-through businesses can deduct up to 20% of qualified business income; sale gain and note interest are not qualified business income.

Why it matters: The sale ends the deduction on that business's income, and a big sale year can cap it on other businesses through the taxable-income limit.

Source: IRC 199A(a)

QBI wage and service-business limits start (joint)

Above this taxable income the deduction is limited by wages and property, and phased out for specified service businesses.

Why it matters: Sale-year gain raises taxable income past the range, which can erase the deduction on a service business's final-year income.

Source: Rev. Proc. 2025-32 sec. 4.26

QBI wage and service-business limits start (other filers)

The same limits for single and head of household filers.

Why it matters: Same effect at lower income for unmarried sellers.

Source: Rev. Proc. 2025-32 sec. 4.26

Kiddie tax threshold

A child's unearned income above $2,700 is taxed at the parent's rate (children under 19, or full-time students under 24).

Why it matters: Gifting shares or property to young children before a sale does not move the gain into a child's low bracket.

Source: Rev. Proc. 2025-32 sec. 4.02; IRC 1(g)

Section 1245 depreciation recapture

Gain on equipment, furniture, vehicles, amortized intangibles and cost-segregated components is ordinary income up to the depreciation taken.

Why it matters: Taxed at ordinary rates up to 37% instead of capital gain rates, and all of it is taxed in the year of sale even on an installment sale.

Source: IRC 1245(a)

Section 1250 additional depreciation recapture

Depreciation on real property taken faster than straight line (including bonus on 15-year land improvements) is ordinary income on sale.

Why it matters: Turns part of a real estate gain into ordinary income that is taxed in year one under the installment rules.

Source: IRC 1250(a)

Unrecaptured Section 1250 gain rate

Gain on a building equal to the straight-line depreciation taken is taxed at a maximum of 25%.

Why it matters: On a long-held rental this layer can be a large share of the gain; it is taxed at the lower ordinary rate when that is below 25%.

Source: IRC 1(h)(1)(E), 1(h)(6)

Section 291 corporate recapture

A C corporation selling depreciated real property treats 20% of the straight-line depreciation (the amount that would be ordinary under 1245) as ordinary income.

Why it matters: Raises the corporate tax on a C corporation's real estate sale before any distribution to shareholders.

Source: IRC 291(a)(1)

Related-party sale of depreciable property

Gain on selling depreciable property to a related person (including a 50%-or-more controlled entity or a trust you benefit from) is entirely ordinary income.

Why it matters: Selling a building to your own entity or family trust can turn all of the gain, not just recapture, into ordinary income.

Source: IRC 1239(a)-(b)

Depreciation allowed or allowable

Basis is reduced by the depreciation you were entitled to take, even if you did not take it.

Why it matters: Missed depreciation still raises the taxable gain; a catch-up deduction before the sale can recover it.

Source: IRC 1016(a)(2)

Missed depreciation catch-up (Form 3115)

An automatic accounting method change lets an owner deduct all missed depreciation in one year.

Why it matters: Taking the catch-up in a high-income year before the sale can offset ordinary income at top rates.

Source: Rev. Proc. 2025-23 sec. 6.01

Building recovery periods

Residential rental buildings are depreciated over 27.5 years and nonresidential buildings over 39 years.

Why it matters: The period sets how much depreciation, and therefore unrecaptured 1250 gain, has built up by the sale date.

Source: IRC 168(c)

Land versus building allocation

Land is not depreciable, so the purchase price must be split between land and building.

Why it matters: A bigger building share means more past depreciation and more 25% gain; a bigger land share means more 15%/20% gain.

Source: Treas. Reg. 1.167(a)-2

100% bonus depreciation

Property with a recovery period of 20 years or less acquired after January 19, 2025 can be fully deducted in the first year.

Why it matters: Bonus on replacement property can offset sale-year income, but bonus taken on property you later sell becomes year-one ordinary recapture.

Source: IRC 168(k)

Section 179 expensing limit

A business can expense up to this amount of equipment placed in service in 2026, phased out above a spending cap.

Why it matters: Expensing equipment bought with sale proceeds can offset sale-year business income; expensed equipment is fully 1245 property on a later sale.

Source: Rev. Proc. 2025-32 sec. 4.24

Cost segregation history

A cost segregation study reclassifies parts of a building into 5-, 7- and 15-year property.

Why it matters: It speeds deductions while you own the property, but those components produce ordinary recapture taxed in the year of sale.

Source: IRC 1245(a)(3); IRS Pub. 5653

Qualified production property deduction

New 100% first-year write-off for factory buildings used in manufacturing, placed in service after July 4, 2025 and before 2031.

Why it matters: Lowers tax while held, but the building is treated as 1245 property, so the write-off is ordinary recapture on sale, and changing its use within 10 years triggers recapture.

Source: IRC 168(n)

Amortized intangibles (Section 197)

Goodwill and other intangibles bought in an acquisition are amortized over 15 years and the amortization is recaptured as ordinary income.

Why it matters: A seller who bought the business (rather than built it) has ordinary recapture on the goodwill amortization taken.

Source: IRC 197(a), 197(f)(7)

Farmland soil and water recapture

Soil and water conservation and land clearing deductions on farmland held less than 10 years are recaptured as ordinary income on sale.

Why it matters: A farm sale within 10 years of the deductions converts part of the gain to ordinary income.

Source: IRC 1252

Oil and gas intangible drilling cost recapture

Intangible drilling costs and depletion deducted on an oil or gas property are recaptured as ordinary income on sale.

Why it matters: Owners who used drilling deductions to offset other income face ordinary income when the interest is sold.

Source: IRC 1254

Energy credit recapture

Selling property within 5 years after an investment-type energy credit was claimed recaptures part of the credit.

Why it matters: Adds tax in the sale year for owners who put solar or similar credit property on a building they now sell.

Source: IRC 50(a)

Installment method is the default

A sale with at least one payment received after the year of sale is reported on the installment method unless you elect out.

Why it matters: Gain is taxed as principal is received, so each year's gain can use that year's brackets.

Source: IRC 453(a)-(b)(1)

Gross profit ratio

Gross profit divided by contract price; that share of each principal payment is taxable gain.

Why it matters: Low basis means a high ratio, so more of each payment is taxed; basis recovery is spread over the same payments.

Source: IRC 453(c)

Contract price

The selling price minus qualifying debt the buyer assumes (up to your basis).

Why it matters: Assumed debt lowers contract price, which raises the gross profit ratio and the gain in each payment.

Source: Treas. Reg. 15a.453-1(b)(2)(iii)

Selling expenses on an installment sale

Commissions and other selling costs reduce gross profit; they are not payments received.

Why it matters: Lowers the gross profit ratio so less of each payment is taxed.

Source: IRS Pub. 537

Buyer's note is not a payment

Receiving the buyer's promissory note is not a payment, even if a third party backs it.

Why it matters: This is what lets gain wait until principal is actually paid.

Source: IRC 453(f)(3)

Demand or tradable notes

A buyer's note payable on demand, or issued in readily tradable form, is treated as a payment when received.

Why it matters: A note drafted this way taxes the whole gain at closing.

Source: IRC 453(f)(4)

Note secured by cash or cash equivalents

A note secured directly or indirectly by cash, a certificate of deposit or Treasury securities is treated as a payment.

Why it matters: Collateralizing the note with an escrowed cash account or similar asset taxes the gain at closing.

Source: Treas. Reg. 15a.453-1(b)(3)(i)

Third-party obligations

A note or obligation of anyone other than the buyer is a payment when you receive it.

Why it matters: Replacing the buyer's note with someone else's obligation can trigger the whole remaining gain.

Source: Treas. Reg. 15a.453-1(b)(3)(i)

Assumed mortgage over basis

Debt the buyer assumes or takes subject to is not a payment, except the part that exceeds your basis.

Why it matters: Highly leveraged property can produce a year-one payment (and gain) with no cash.

Source: Treas. Reg. 15a.453-1(b)(3)(i)

Mortgage paid off at closing

When the buyer's money pays off your existing loan at closing, that amount is a payment to you in the year of sale.

Why it matters: A large payoff puts a large slice of gain in year one, so a loan payoff limits how much gain can be spread.

Source: Treas. Reg. 15a.453-1(b)(3)(i)

Debt placed on the property before the sale

Debt added in contemplation of the sale that speeds up basis recovery is not qualifying debt.

Why it matters: A cash-out loan right before selling and having the buyer assume it can be treated as a payment.

Source: Treas. Reg. 15a.453-1(b)(2)(iv)

Election out of the installment method

You can elect to report all the gain in the year of sale; it is due by the return due date (with extensions) and is hard to revoke.

Why it matters: Useful when year one has losses, low income or expiring carryforwards; otherwise it gives up the spread.

Source: IRC 453(d)

Dealer dispositions excluded

Real property held for sale to customers and personal property sold by a dealer cannot use the installment method.

Why it matters: Subdividers and frequent flippers must report the whole gain (as ordinary income) at sale.

Source: IRC 453(b)(2)(A), 453(l)(1)

Farm property is not a dealer disposition

Property used or produced in farming is excluded from the dealer rules.

Why it matters: Farm sellers can use the installment method even for property produced for sale.

Source: IRC 453(l)(2)(A)

Timeshare and residential lot election

A dealer selling timeshares or residential lots to individuals can elect the installment method if it pays interest on the deferred tax.

Why it matters: Opens installment reporting to some dealers, at an interest cost.

Source: IRC 453(l)(2)(B), 453(l)(3)

Inventory excluded

Personal property that must be carried in inventory cannot be sold on the installment method.

Why it matters: In a business asset sale, the inventory portion of the price is taxed in full at closing.

Source: IRC 453(b)(2)(B)

Publicly traded stock and securities

Notes received for publicly traded stock or securities do not qualify; all payments are treated as received in the year of sale.

Why it matters: Selling listed shares on terms does not spread the gain.

Source: IRC 453(k)(2)

Recapture taxed in year one

All Section 1245 and 1250 ordinary recapture is recognized in the year of sale, even if no payment is received that year.

Why it matters: Equipment-heavy or cost-segregated sales need cash in year one to pay tax on the recapture.

Source: IRC 453(i)

Order of gain in each payment

Unrecaptured Section 1250 gain comes out of the payments first, before the 15%/20% gain.

Why it matters: The early payments carry the 25% layer, so later payments are mostly lower-rate gain.

Source: Treas. Reg. 1.453-12(a)

Interest on the note

Interest you receive on the buyer's note is ordinary income, portfolio income for passive loss rules, and net investment income.

Why it matters: Interest adds ordinary income every year; passive losses cannot offset it.

Source: Temp. Reg. 1.469-2T(c)(3)(i)(A)

Related buyer resells within 2 years

If a related buyer resells within 2 years, you are treated as receiving the resale proceeds (up to the unpaid price).

Why it matters: Selling to family on terms and having them resell quickly brings your deferred gain into that year.

Source: IRC 453(e)(1)-(2)

Related resale of marketable securities

For marketable securities, the related-party resale rule has no 2-year limit.

Why it matters: A family installment sale of marketable securities stays exposed until the note is paid.

Source: IRC 453(e)(2)(A)

Holding period suspension when risk is reduced

The 2-year clock stops while the related buyer's risk of loss is reduced by a put, short sale or similar arrangement.

Why it matters: Hedging by the family buyer can stretch the window in which a resale accelerates your gain.

Source: IRC 453(e)(2)(B)

Related resale exceptions

Resales after the death of either party, involuntary conversions, and sales shown not to have tax avoidance as a principal purpose are excepted.

Why it matters: These exceptions decide whether a related-party installment sale can survive a family resale.

Source: IRC 453(e)(6)-(7)

Who is a related person

Related persons include spouse, children, grandchildren, parents, and entities and trusts linked by ownership attribution.

Why it matters: Siblings are outside the 453(e) definition, which changes which family sales are exposed.

Source: IRC 453(f)(1)

Depreciable property sold to a related entity

An installment sale of depreciable property to a controlled entity or related person is taxed as if all payments were received at sale, unless no tax-avoidance purpose is shown.

Why it matters: Selling a building to your own company on terms usually gets no deferral.

Source: IRC 453(g)

Contingent price with a stated maximum

When the price is contingent but has a maximum, gain is figured as if the maximum will be paid.

Why it matters: Basis is spread against the maximum, which can front-load gain if the full price is not reached.

Source: Treas. Reg. 15a.453-1(c)(2)

Contingent price with a fixed period only

With no maximum but a fixed payment period, basis is recovered in equal parts over the years of the period.

Why it matters: Gain recognition follows a straight-line basis recovery that may not match the cash.

Source: Treas. Reg. 15a.453-1(c)(3)

Contingent price with no maximum and no period

With neither a maximum price nor a fixed period, basis is generally recovered over 15 years.

Why it matters: Earn-outs with open terms can push basis recovery out 15 years and accelerate gain.

Source: Treas. Reg. 15a.453-1(c)(4)

Section 453A $5 million threshold

An interest charge applies when the face amount of installment notes from the year's sales still held at year end exceeds $5 million.

Why it matters: Large seller-financed deals pay interest to the IRS on the deferred tax, which reduces the value of spreading.

Source: IRC 453A(b)(2)

Section 453A $150,000 sale price floor

Only notes from sales of property for more than $150,000 count toward the interest charge and the pledge rule.

Why it matters: Small sales are outside both rules.

Source: IRC 453A(b)(1)

Section 453A applicable percentage

Only the share of deferred tax tied to note balances above $5 million is charged interest.

Why it matters: A $6 million note pays interest on one-sixth of the deferred tax, not all of it.

Source: IRC 453A(c)(4)

Section 453A deferred tax measure

The deferred tax is the unrecognized gain times the top rate in effect (37% ordinary, 20% or 25% for capital gain).

Why it matters: The charge is computed at top rates even if your actual rate would be lower.

Source: IRC 453A(c)(3)

Section 453A interest rate

The interest charge uses the IRS underpayment rate for the last month of the year.

Why it matters: At 7%, the annual charge on large notes can approach the after-tax value of deferral.

Source: IRC 453A(c)(2); IR-2026-98

Section 453A charge is interest

The charge is treated as interest, which individuals generally cannot deduct as personal interest.

Why it matters: The full charge is an after-tax cost.

Source: IRC 453A(c)(5); IRC 163(h)

Farm property exception

Notes from selling property used or produced in farming are exempt from the interest charge and the pledge rule.

Why it matters: Farm and ranch sellers can carry notes far above $5 million without the charge.

Source: IRC 453A(b)(3)(B)

Personal use property exception

Notes from an individual's sale of personal use property (such as a home) are exempt.

Why it matters: A large home sale on terms avoids the charge.

Source: IRC 453A(b)(3)(A)

Pledge rule

Borrowing secured by an installment note, or any arrangement that lets the note satisfy the loan, is treated as a payment on the note.

Why it matters: Using the note as collateral brings gain into the year of the loan.

Source: IRC 453A(d)

Selling or settling the note at a discount

Selling the note, or accepting less than face in full settlement, triggers gain equal to the amount realized minus your basis in the note.

Why it matters: Discounting or selling the note to get cash early brings the remaining gain into that year.

Source: IRC 453B(a)(1)

Gifting the note

A gift of the note is a disposition measured at fair market value; cancelling it is treated as a disposition.

Why it matters: Forgiving a family buyer's payments or gifting the note triggers the deferred gain to you.

Source: IRC 453B(a)(2), 453B(f)

Transfer to a spouse

Transferring the note to a spouse or former spouse incident to divorce is not a disposition.

Why it matters: The deferred gain moves with the note to the spouse.

Source: IRC 453B(g)

Death of the note holder

Passing the note at death is not a disposition; the heirs report the remaining gain as payments arrive.

Why it matters: No step-up on the note, so the heirs pay the deferred tax.

Source: IRC 453B(c)

Repossession of real property: gain limit

When you take back real property for nonpayment, gain is limited to cash and property received before the repossession minus gain already reported, capped by the original profit less costs.

Why it matters: Default costs less tax than a new sale would, and you get the property back.

Source: IRC 1038(a)-(b)

Repossession of real property: basis

Your basis in reacquired real property is the note's basis plus the gain recognized and repossession costs.

Why it matters: Sets the gain on any later resale of the repossessed property.

Source: IRC 1038(c)

Repossession of a former home

If the property was a home whose gain was excluded and you resell it within one year, the repossession is ignored and the resale is treated as part of the original sale.

Why it matters: Keeps the home exclusion intact after a buyer default.

Source: IRC 1038(e)

Bad debt on an unsecured or under-secured note

A worthless seller note held outside a business is a short-term capital loss when it becomes totally worthless.

Why it matters: If the buyer of a business defaults and collateral is thin, the loss is capital and only $3,000 a year offsets ordinary income.

Source: IRC 166(d)

Down payment

Cash the buyer pays at closing before the note starts.

Why it matters: A larger down payment cuts default risk but is a year-one payment, so it puts more gain in the sale year.

Source: IRS Pub. 537

Security interest and lien position

A recorded first-position deed of trust or mortgage on real property (or a security interest in business assets) securing the note.

Why it matters: Collateral is what you recover in a default; a junior position behind a bank loan can leave little to recover.

Source: UCC 9-203 (attachment); Treas. Reg. 15a.453-1(b)(3)(i)

Subordination to the buyer's lender

An agreement putting your note behind the buyer's bank loan in payment and collateral priority.

Why it matters: Common in business sales financed by a bank; it raises the chance you recover little after a default.

Source: UCC 9-339

Personal guarantee from the buyer's owners

Owners of the buying company sign personally to stand behind the note.

Why it matters: Adds a second source of payment without making the note a taxable payment.

Source: Treas. Reg. 15a.453-1(b)(3)(i)

Standby letter of credit

A bank's standby letter of credit backing the buyer's note.

Why it matters: Gives strong credit support without being treated as a payment, if it is a true standby credit.

Source: Treas. Reg. 15a.453-1(b)(3)(iii)

Escrow or holdback of sale proceeds

Part of the price held in escrow for indemnity claims or to secure the note.

Why it matters: Escrowed cash you can look to directly may be taxed as a payment; a true contingency holdback is taxed when released.

Source: Treas. Reg. 15a.453-1(b)(3)(i)

Default, cure and acceleration terms

The note's events of default, cure period, right to accelerate the balance, covenants, financial reporting and collateral upkeep (title, hazard coverage, taxes paid).

Why it matters: Clear remedies decide how fast and how fully you recover after a missed payment.

Source: UCC 9-601

Due-on-sale clause

A clause making the note due if the buyer sells or transfers the property.

Why it matters: Stops the buyer from passing your collateral to someone you never approved; an early payoff brings the remaining gain into that year.

Source: 12 U.S.C. 1701j-3

Buyer creditworthiness

The buyer's income, assets, experience and existing debt.

Why it matters: The deferral is only worth something if the payments arrive; a weak buyer turns deferred gain into a collection problem.

Source: IRC 166 (loss if note becomes worthless)

Real property only

Only real property held for business or investment qualifies; equipment, vehicles, goodwill and other personal property do not.

Why it matters: In a business sale only the real estate can be exchanged; the rest of the price is taxed.

Source: IRC 1031(a)(1)

Held for business or investment

Both the property sold and the replacement must be held for productive use in a business or for investment.

Why it matters: Property bought to flip, a quick resale of the replacement, or a personal home fails.

Source: IRC 1031(a)(1)

Property held primarily for sale

Real property held primarily for sale (dealer property) is excluded.

Why it matters: Developers and subdividers cannot defer gain on lots or units held for sale.

Source: IRC 1031(a)(2)

U.S. versus foreign real property

Real property in the United States and real property outside it are not like-kind.

Why it matters: Limits replacement choices to the same side of the border.

Source: IRC 1031(h)

Partnership interests excluded

An interest in a partnership or LLC is not real property for 1031, so co-owners who want different outcomes must restructure before the sale.

Why it matters: Timing of a drop-and-swap restructuring affects whether the held-for-investment test is met.

Source: IRC 1031(a)(1)

45-day identification period

Replacement property must be identified in writing within 45 days after the sale closes.

Why it matters: Missing day 45 ends the exchange; the gain is taxed (possibly in the next year if the funds are released then).

Source: IRC 1031(a)(3)(A)

180-day exchange period

Replacement property must be received by the earlier of 180 days after the sale or the due date (with extensions) of that year's return.

Why it matters: A sale late in the year must extend the return, or the deadline falls on April 15.

Source: IRC 1031(a)(3)(B)

Three-property rule

You may identify up to three properties of any value.

Why it matters: Sets how many backup properties can be named.

Source: Treas. Reg. 1.1031(k)-1(c)(4)

200% rule

You may identify any number of properties if their total value is not more than 200% of the property sold.

Why it matters: Lets you name more backups when values fit under the cap.

Source: Treas. Reg. 1.1031(k)-1(c)(4)

95% exception

If you exceed both limits, the identification still works only if you actually acquire 95% of the value identified.

Why it matters: Over-identifying usually fails the exchange.

Source: Treas. Reg. 1.1031(k)-1(c)(4)(ii)(B)

How identification must be made

Identification must be in a written document signed by you, unambiguously describe the property, and be delivered to the intermediary or other proper party before day 45.

Why it matters: A defective notice is the same as no identification.

Source: Treas. Reg. 1.1031(k)-1(c)(2)

Incidental property

Personal property that comes with real property is ignored for identification if its value is no more than 15% of the real property.

Why it matters: Furniture or equipment in a replacement building does not need separate identification, but it is still taxable boot if received.

Source: Treas. Reg. 1.1031(k)-1(c)(5)

Qualified intermediary safe harbor

A qualified intermediary holds the sale proceeds so you never have actual or constructive receipt.

Why it matters: Touching the cash, even briefly, ends deferral.

Source: Treas. Reg. 1.1031(k)-1(g)(4)

When the intermediary may release funds

Funds can be released only after day 45 if nothing was identified, after you receive all identified property, or on a written contingency beyond your control.

Why it matters: If the exchange fails, money can stay locked until day 180, which can move the taxable year.

Source: Treas. Reg. 1.1031(k)-1(g)(6)

Disqualified intermediary

Your attorney, accountant, broker, employee or relative who acted for you within the prior 2 years cannot be your intermediary (routine services excepted).

Why it matters: Using the wrong intermediary is treated as receiving the cash.

Source: Treas. Reg. 1.1031(k)-1(k)

Interest earned on exchange funds

Interest the intermediary earns on your exchange funds is generally taxed to you.

Why it matters: Small, but taxable ordinary income in the exchange year.

Source: Treas. Reg. 1.468B-6

Intermediary bankruptcy relief

If an intermediary defaults or goes bankrupt, gain is reported as funds are actually recovered.

Why it matters: Limits the tax damage when an intermediary fails.

Source: Rev. Proc. 2010-14

Exchange with a related party: 2-year hold

If you exchange with a related person, both must keep the properties for 2 years or the deferred gain is taxed.

Why it matters: Family or affiliate exchanges carry a 2-year lock.

Source: IRC 1031(f)

Buying replacement from a related party through an intermediary

Buying replacement property from a related person through an intermediary fails when the related seller cashes out.

Why it matters: Rules out buying a family member's property as the replacement in most cases.

Source: Rev. Rul. 2002-83

Cash boot

Cash or other non-like-kind value you receive in the exchange.

Why it matters: Gain is taxed up to the boot received; cash left at the intermediary is taxed when released.

Source: IRC 1031(b)

Mortgage relief boot

Debt paid off or assumed on the property you sell that is not replaced by new debt or added cash.

Why it matters: Trading down in debt creates taxable boot even with no cash in hand.

Source: Treas. Reg. 1.1031(d)-2

Boot netting rules

New debt or cash added offsets debt relief, but new debt never offsets cash you receive.

Why it matters: Taking cash out at closing is taxed even if you borrow more on the replacement.

Source: Treas. Reg. 1.1031(d)-2, Example 2

Non-like-kind property received

Personal property, notes or other assets received along with the replacement real estate.

Why it matters: Their value is taxable boot; a buyer's note can be reported on the installment method.

Source: IRC 1031(b)

Exchange expenses

Commissions, title and escrow fees paid from exchange funds.

Why it matters: Paying transactional costs from the funds does not create boot and reduces the gain; paying non-transactional items (like loan payoffs or deposits) can.

Source: Treas. Reg. 1.1031(k)-1(g)(7)

Losses not recognized

A loss on property exchanged under 1031 cannot be deducted.

Why it matters: Property with a loss should usually be sold, not exchanged.

Source: IRC 1031(c)

Carryover basis in the replacement

The replacement's basis is the old basis, plus boot paid and gain recognized, minus boot received.

Why it matters: The deferred gain sits in the replacement and is taxed on a later taxable sale unless the owner dies first.

Source: IRC 1031(d)

Holding period carries over

The replacement's holding period includes the time you held the property you exchanged.

Why it matters: Keeps long-term treatment on a quick later sale.

Source: IRC 1223(1)

Depreciation of exchanged basis

Carried-over basis keeps depreciating on the old schedule; only added basis starts a new schedule.

Why it matters: Limits new depreciation deductions after an exchange compared with a fresh purchase.

Source: Treas. Reg. 1.168(i)-6

Bonus depreciation on replacement

Only the excess basis (funded by new debt or cash) of used replacement property can take bonus depreciation.

Why it matters: A cost segregation study on the replacement can produce large write-offs only on the new money portion.

Source: Treas. Reg. 1.168(k)-2(g)(5)(iii)

Section 1245 recapture in an exchange

Cost-segregated 1245 property exchanged for real estate with less 1245 value can trigger ordinary recapture with no boot.

Why it matters: A surprise ordinary-income bill on an otherwise fully deferred exchange.

Source: IRC 1245(b)(4)

Section 1250 recapture in an exchange

Additional depreciation on real property is recaptured in an exchange only to the extent of boot or the value of non-1250 property received.

Why it matters: Usually no ordinary recapture in a like-for-like real estate exchange.

Source: IRC 1250(d)(4)

Suspended passive losses stay suspended

A 1031 exchange is not a fully taxable disposition, so the old property's suspended passive losses carry to the replacement.

Why it matters: Losses that would free up in a taxable sale stay locked until the replacement is sold in a taxable sale.

Source: IRC 469(g)(1)(A)

Reverse exchange safe harbor

An accommodator can hold (park) the replacement before you sell, with 45 days to identify the property to sell and 180 days to finish.

Why it matters: Lets a seller lock in the replacement first, at added cost.

Source: Rev. Proc. 2000-37

No parking of property you already own

The reverse exchange safe harbor does not cover property you owned within the prior 180 days.

Why it matters: You cannot build on land you already own inside the safe harbor.

Source: Rev. Proc. 2004-51

Improvement (build-to-suit) exchange

Improvements count toward replacement value only if built and in place before you receive the property, within 180 days.

Why it matters: Unfinished construction at day 180 is boot.

Source: Treas. Reg. 1.1031(k)-1(e)

Tenancy-in-common interests

Fractional tenancy-in-common interests can be replacement property if the arrangement is co-ownership, not a partnership (ruling guidelines: up to 35 co-owners, unanimous major decisions).

Why it matters: Opens fractional replacement options that fit leftover exchange dollars.

Source: Rev. Proc. 2002-22

Vacation and second homes

A dwelling qualifies under a safe harbor if owned 24 months before (or after) the exchange and rented at least 14 days a year with personal use under 14 days or 10% of rental days.

Why it matters: Determines whether a second home can be exchanged.

Source: Rev. Proc. 2008-16

Home sale exclusion combined with 1031

For property that was both your home and a rental, the home sale exclusion applies first, and the rest of the gain can be deferred with a 1031.

Why it matters: A former home that is now a rental can exclude part and defer the rest.

Source: Rev. Proc. 2005-14

Five-year hold for exchanged homes

A home acquired in a 1031 exchange must be held 5 years before the home sale exclusion can apply.

Why it matters: Moving into a replacement rental is a slow path to the exclusion.

Source: IRC 121(d)(10)

Failed exchange reported on the installment method

If you had a bona fide intent to exchange, gain on a failed exchange is reported when the intermediary pays out, not at closing.

Why it matters: A sale late in the year can push the gain into the next tax year when funds are released after December 31.

Source: Treas. Reg. 1.1031(k)-1(j)(2)

1031 plus an installment sale on the boot

A buyer's note received through the intermediary can be reported on the installment method, with the like-kind part excluded from contract price.

Why it matters: Lets a seller take part of the price as a note, deferring tax on that boot until paid.

Source: IRC 453(f)(6); Treas. Reg. 1.1031(k)-1(j)(2)(iii)

Refinancing around an exchange

Cash-out loans taken right before the sale, or as part of the exchange, can be treated as boot; no rule sets a safe waiting period.

Why it matters: Pulling cash out to avoid boot can backfire if tied to the exchange.

Source: Treas. Reg. 1.1031(d)-2

Eligible gain types

Capital gain and gross Section 1231 gain from a sale to an unrelated person can be invested; ordinary income, recapture and note interest cannot.

Why it matters: Only part of a big sale's gain may qualify; 1245 recapture still needs cash in year one.

Source: Treas. Reg. 1.1400Z2(a)-1(b)(11)

Sale to a related person

Gain from a sale to a related person (20% common ownership) is not eligible.

Why it matters: Family or affiliate sales cannot feed a fund.

Source: IRC 1400Z-2(e)(2)

180-day investment window

The gain must be invested in a qualified opportunity fund within 180 days of the sale.

Why it matters: Missing the window loses the deferral.

Source: IRC 1400Z-2(a)(1)(A)

180-day start for installment payments

For installment gain you may start each 180-day period on the date the payment is received or on the last day of the tax year.

Why it matters: Each note payment can be rolled into a fund on its own clock.

Source: Treas. Reg. 1.1400Z2(a)-1(b)(11)(viii)(B)

180-day start for gain from a partnership or S corporation

If the entity does not invest, an owner's 180 days can start at the entity's year end, its sale date, or its return due date.

Why it matters: Gives business co-owners more time to decide.

Source: Treas. Reg. 1.1400Z2(a)-1(c)(8)

Deferral end date for investments under the old law

Gain invested on or before December 31, 2026 is included in income on December 31, 2026 (the 2026 return), if not earlier.

Why it matters: Investing in 2026 buys almost no deferral; waiting until 2027 gets the new 5-year rule.

Source: IRC 1400Z-2(b)(1) (prior law); Notice 2026-40 sec. 4.01

2026 gain invested in 2027

Eligible gain realized on or before December 31, 2026 and invested on or after January 1, 2027 within its 180 days gets the new rules.

Why it matters: A late-2026 sale can reach the 5-year rolling deferral by investing in early 2027.

Source: Notice 2026-40

Rolling 5-year deferral

For investments after December 31, 2026, the deferred gain is taxed at the earlier of a sale of the fund interest or 5 years after the investment.

Why it matters: Gives a real 5-year deferral, but the tax comes due while the fund is usually still illiquid.

Source: IRC 1400Z-2(b)(1)

10% basis step-up at 5 years

Holding the fund interest 5 years excludes 10% of the deferred gain from tax.

Why it matters: Cuts the deferred tax by a tenth.

Source: IRC 1400Z-2(b)(2)(B)

30% step-up for rural funds

Investments in a qualified rural opportunity fund get a 30% basis step-up after 5 years.

Why it matters: Triples the step-up, the clearest angle for farm and ranch sellers.

Source: IRC 1400Z-2(b)(2)(B)

10-year exclusion of fund appreciation

After 10 years you can elect to step basis up to fair market value, so fund growth is not taxed; the step-up is capped at the value on the 30th anniversary.

Why it matters: The main payoff; worth a lot only if the fund performs.

Source: IRC 1400Z-2(c)

Amount of deferred gain taxed

At inclusion, the gain taxed is the smaller of the deferred gain or the fund interest's value, minus the basis step-up.

Why it matters: If the fund has lost value, less deferred gain is taxed.

Source: IRC 1400Z-2(b)(2)(A)

Character of deferred gain

Deferred gain keeps its character (25% layer, 15%/20% gain, 3.8% tax) when it is later included.

Why it matters: Rates at inclusion apply, which may differ from the sale year.

Source: Treas. Reg. 1.1400Z2(a)-1(c)(1)

Equity only

The investment must be equity in the fund, not a loan.

Why it matters: A debt investment gets no benefit.

Source: Treas. Reg. 1.1400Z2(a)-1(b)(12)

Only the gain amount qualifies

Money invested beyond the eligible gain is a separate, non-qualifying investment.

Why it matters: Basis recovery and interest put into a fund get no tax benefit.

Source: IRC 1400Z-2(e)(1)

90% asset test

A fund must hold at least 90% of its assets in qualified opportunity zone property, tested twice a year.

Why it matters: A fund that fails pays penalties and can lose status, which puts the investor's benefits at risk.

Source: IRC 1400Z-2(d)(1)

Business tests and working capital safe harbor

A zone business needs at least 70% of its tangible property in the zone and can hold cash under a written plan for up to 31 months.

Why it matters: Determines whether a fund's projects qualify while under construction.

Source: Treas. Reg. 1.1400Z2(d)-1

Substantial improvement

Existing buildings bought by a fund must be improved by more than their basis (50% in rural zones) within 30 months.

Why it matters: Drives what kind of real estate a fund can buy.

Source: IRC 1400Z-2(d)(2)(D)

New zone map from 2027

New zone designations run January 1, 2027 to December 31, 2036; property acquired after 2026 generally must be in a new zone.

Why it matters: A fund buying in an expired zone after 2026 may not qualify.

Source: IRC 1400Z-1; Notice 2026-40

Election and annual reporting

The deferral is elected on Form 8949, and Form 8997 must be filed every year the investment is held.

Why it matters: Missing Form 8997 creates a presumption that the deferred gain was included.

Source: Form 8997

Inclusion events

Selling, gifting or otherwise transferring the fund interest (other than at death or to a grantor trust) triggers the deferred gain.

Why it matters: Limits estate planning with fund interests.

Source: Treas. Reg. 1.1400Z2(b)-1(c)

Death of the investor

Death is not an inclusion event, but the deferred gain is income in respect of a decedent and the fund interest gets no step-up.

Why it matters: Heirs pay the deferred tax at the 5-year date; they can still reach the 10-year exclusion.

Source: Treas. Reg. 1.1400Z2(b)-1(c)(4)

Trust's purchase price basis

The seller sells to a trust for a note; the trust's basis equals the price, so its resale to the real buyer produces little gain.

Why it matters: The seller's gain is then reported under the installment rules as note principal is paid.

Source: IRC 453

Trustee independence

Whether the trustee is truly independent of the seller (not a relative, agent or controlled entity).

Why it matters: A related or controlled trust can trigger the related-party resale rule or be treated as the seller's agent, taxing the gain at closing.

Source: IRC 453(e), 453(f)(1)

Seller control over the trust's money

Any right of the seller to direct, borrow or draw on the trust's funds.

Why it matters: Control can mean constructive receipt of the proceeds and immediate tax.

Source: Treas. Reg. 1.451-2(a)

Prearranged resale to the real buyer

Whether the buyer was lined up before the trust took title.

Why it matters: The IRS can disregard a transitory intermediary that takes title and immediately resells (the pattern in its monetized sale proposal).

Source: Prop. Reg. 1.6011-13 (REG-109348-22)

Loans from the trust to the seller

Borrowing from the trust, or using the note as collateral, during the note term.

Why it matters: Loan proceeds secured by the note are treated as a payment and taxed.

Source: IRC 453A(d)

Note interest rate

The rate the trust pays on the seller's note; it must be at least the applicable federal rate.

Why it matters: Interest is ordinary income each year; a rate the trust cannot earn after fees drains principal.

Source: IRC 1274(d)

Payment schedule (interest-only, balloon, amortizing)

How principal is paid: interest-only with a balloon, or amortized.

Why it matters: Principal timing decides when gain is taxed; a long interest-only period defers gain but concentrates it at the balloon.

Source: IRC 453(c)

Trust investment return

What the trust's portfolio earns after expenses.

Why it matters: The note is paid from trust assets, so weak returns can delay or cut payments.

Source: IRC 453 (governs when the seller is taxed)

Trustee, setup and management fees

Fees charged to set up and run the trust and manage its money; no published standard.

Why it matters: Fees reduce what the trust can pay the seller and should be compared with the tax deferred.

Source: IRC 453 (governs when the seller is taxed)

No outside collateral

The seller's note is usually backed only by the trust's assets.

Why it matters: If investments lose value, the seller has limited recourse; a worthless note is a capital loss.

Source: IRC 166(d)

Tax on the trust's own income

A non-grantor trust pays tax on investment income it keeps beyond the interest it pays out.

Why it matters: Trust brackets reach 37% at $16,000, so retained income is expensive.

Source: Rev. Proc. 2025-32, Table 5

Using it after a 1031 has closed

Once sale proceeds are with a qualified intermediary, buying a third-party note with them is treated as a payment.

Why it matters: A deferred sales trust must be set up before closing, not as a rescue for funds already at the intermediary.

Source: Treas. Reg. 15a.453-1(b)(3)(i)

Treated as direct real property

An interest in a Delaware statutory trust that meets IRS conditions is treated as a direct interest in real property, so it can be 1031 replacement property.

Why it matters: Lets a seller finish an exchange with a passive fractional interest instead of buying a building.

Source: Rev. Rul. 2004-86 (2004-33 I.R.B.)

Trustee power limits

The trustee cannot accept new capital, take on new loans or renegotiate existing ones, reinvest sale proceeds, renegotiate leases or make more than minor capital improvements, and must distribute cash.

Why it matters: These limits keep the trust 1031-eligible but make it inflexible if the property needs new money or a refinance.

Source: Rev. Rul. 2004-86

Accredited investor requirement

These offerings are sold privately to accredited investors: $1 million net worth excluding the home, or $200,000 income ($300,000 joint).

Why it matters: Limits who can use this replacement option.

Source: 17 CFR 230.501(a)

Trust debt counts toward debt replacement

Your share of the trust's loan counts as debt on the replacement property.

Why it matters: Choosing a leveraged trust interest can replace the mortgage paid off and avoid mortgage boot.

Source: Treas. Reg. 1.1031(d)-2

Sponsor loads and fees

Selling commissions, offering costs and sponsor fees taken from the equity raised.

Why it matters: They reduce the real estate actually bought and the return on deferred dollars.

Source: Offering documents; Rev. Rul. 2004-86 governs eligibility only

Exit timing and options

The sponsor decides when the property is sold; at exit you can do another 1031, a 721 exchange into an operating partnership, or pay tax.

Why it matters: You do not control when the deferred gain may be triggered.

Source: IRC 1031(d) (carryover basis follows)

Passive rental income and losses

Trust income and depreciation pass through to you as passive rental items.

Why it matters: Depreciation can create new passive losses, and old suspended losses stay suspended after the exchange.

Source: IRC 469(c)(2)

Payout rate range

A charitable remainder trust must pay you at least 5% and no more than 50% of its value (unitrust) or initial value (annuity trust) each year.

Why it matters: A higher payout gives more income but a smaller deduction and may fail the 10% remainder test.

Source: IRC 664(d)(1)(A), (d)(2)(A)

10% remainder test

The value of the charity's remainder must be at least 10% of the property contributed.

Why it matters: Limits payout and term for younger donors; fails the trust if not met.

Source: IRC 664(d)(1)(D), (d)(2)(D)

Annuity trust versus unitrust

An annuity trust (CRAT) pays a fixed dollar amount; a unitrust (CRUT) pays a fixed percent of each year's value and can accept added contributions.

Why it matters: Fixed payments suit income needs; percentage payments rise and fall with the portfolio.

Source: IRC 664(d)

5% probability test (annuity trusts)

An annuity trust fails if there is more than a 5% chance the trust runs out before the charity is paid, unless it includes the IRS sample early-termination clause.

Why it matters: With high payouts or young beneficiaries, an annuity trust may not qualify without the clause.

Source: Rev. Proc. 2016-42

Section 7520 rate

The IRS discount rate used to value the charity's remainder and your income interest.

Why it matters: A higher rate increases the deduction for an annuity trust and lowers it for lead trusts; you can use the rate for the month of the gift or either of the 2 prior months.

Source: Rev. Rul. 2026-19, Table 5

Net income and flip unitrusts

A unitrust can pay only its actual income (with makeup) and can flip to a regular unitrust after a triggering event such as the sale of the contributed property.

Why it matters: Useful when the trust holds unsold land or a business that produces little income.

Source: Treas. Reg. 1.664-3(a)(1)(i)(b)-(c)

Four-tier taxation of payments

Payments are taxed first as ordinary income, then capital gain, then tax-exempt income, then return of principal, based on the trust's history.

Why it matters: The sale gain inside the trust is taxed to you gradually as it is paid out, at the character in that tier.

Source: IRC 664(b)

Trust is exempt; 100% excise on business income

The trust pays no income tax on the sale, but unrelated business taxable income is hit with a 100% excise tax.

Why it matters: Debt-financed or operating-business assets can create unrelated business income inside the trust.

Source: IRC 664(c)

Deduction for the remainder

You deduct the present value of the charity's remainder, limited to 30% of AGI for appreciated property to a public charity (20% for a private foundation), with a 5-year carryover.

Why it matters: The deduction offsets part of a sale-year spike but only up to the AGI limits.

Source: IRC 170(b)(1)(C)-(D), 170(d)(1)

Listed transaction for certain annuity trust arrangements

An annuity trust that sells contributed property, buys a commercial contract with the proceeds, and has the beneficiary report payments outside the tier rules is a listed transaction.

Why it matters: Participants face disclosure duties and penalties; payments are taxed under the normal tier rules.

Source: 91 FR 42353 (July 9, 2026)

Grantor versus non-grantor lead trust

A grantor lead trust gives you an up-front deduction but taxes you on the trust's income each year; a non-grantor lead trust pays its own tax and deducts what it pays to charity.

Why it matters: A grantor lead trust can offset a sale-year spike, at the cost of taxable income in later years.

Source: IRC 170(f)(2)(B)

Lead trust remainder to heirs

Payments go to charity for a term, then the remainder passes to heirs; the taxable gift is the remainder's present value at the 7520 rate.

Why it matters: A low 7520 rate and good investment returns can pass growth to heirs with little gift tax.

Source: IRC 2522(c)(2)(B)

Pooled income fund

You give appreciated property to a charity's pooled fund and receive a share of its income for life.

Why it matters: Avoids gain on the contributed property with an income stream and a remainder deduction.

Source: IRC 642(c)(5)

Bargain sale to charity

Selling property to a charity for less than its value: basis is split between the sale and the gift parts.

Why it matters: Part of the gain is still taxed even though part of the value is donated.

Source: IRC 1011(b)

Gift of appreciated property to a donor-advised fund

Giving long-term appreciated property (or a business interest before a sale is fixed) avoids tax on that gain and gives a fair market value deduction.

Why it matters: Shrinks the sale-year gain and adds a deduction, up to 30% of AGI.

Source: IRC 170(b)(1)(C), 170(e)

Ordinary income property reduction

For donated property, the deduction is reduced by any gain that would be ordinary or short-term (such as 1245 recapture).

Why it matters: Donating equipment-heavy or short-held property gives a smaller deduction.

Source: IRC 170(e)(1)(A)

Cash gift limit

Cash gifts to public charities are deductible up to 60% of AGI.

Why it matters: A sale year raises AGI and the room for cash gifts.

Source: IRC 170(b)(1)(G)

Appreciated property to a private foundation

Gifts of appreciated property to a private foundation are deductible up to 20% of AGI, generally at basis except qualified public stock.

Why it matters: Family foundations get far less deduction for appreciated property.

Source: IRC 170(b)(1)(D), 170(e)(1)(B)(ii)

Charitable carryover

Gifts above the AGI limits carry forward 5 years.

Why it matters: Large sale-year gifts can still be used in later years, but may expire unused.

Source: IRC 170(d)(1)

0.5% of AGI floor

Starting in 2026, itemized charitable gifts count only to the extent they exceed 0.5% of AGI.

Why it matters: In a big sale year the floor is large: 0.5% of a $5 million AGI is $25,000 of gifts that give no deduction.

Source: IRC 170(b)(1)(I)

Charitable deduction for non-itemizers

From 2026, people who take the standard deduction can deduct cash gifts to public charities up to $1,000 ($2,000 joint).

Why it matters: Small, but available in low-income payment years when itemizing does not pay.

Source: IRC 170(p)

Syndicated conservation easements

Pass-through easement deals are listed transactions, and deductions are disallowed when the claimed value is more than 2.5 times the investment.

Why it matters: Promoted as a sale-year offset; carries high audit and penalty exposure.

Source: Notice 2017-10; IRC 170(h)(7)

C corporation stock only

Section 1042 deferral applies only to sales of stock in a domestic C corporation (not S corporation stock) held 3 years.

Why it matters: S corporation owners must convert or forgo the deferral.

Source: IRC 1042(c)(1)

ESOP must own 30% after the sale

Immediately after the sale the ESOP must own at least 30% of the company's stock.

Why it matters: A smaller sale to an ESOP does not qualify.

Source: IRC 1042(b)(2)

3-year holding period

The seller must have held the stock for at least 3 years before the sale.

Why it matters: Recently acquired stock does not qualify.

Source: IRC 1042(b)(4)

Replacement property window

Proceeds must be reinvested in qualified replacement property from 3 months before to 12 months after the sale.

Why it matters: Missing the window taxes the gain.

Source: IRC 1042(c)(3)

What counts as replacement property

Stocks and bonds of U.S. operating corporations (not mutual funds, government bonds or passive companies).

Why it matters: Restricts how the proceeds can be invested.

Source: IRC 1042(c)(4)

Basis carryover and recapture

Replacement property takes the stock's low basis; selling it triggers the deferred gain, but holding until death gets a step-up.

Why it matters: Works best for sellers who will hold the replacement securities for life.

Source: IRC 1042(d)-(e)

Tiered exclusion for stock issued after July 4, 2025

Gain on qualified small business stock is 50% excluded after 3 years, 75% after 4 years and 100% after 5 years.

Why it matters: A founder's stock sale can exclude most or all of the gain.

Source: IRC 1202(a)(5)

Exclusion for stock issued before July 5, 2025

Older stock (acquired after September 27, 2010) needs a holding period of more than 5 years for the 100% exclusion.

Why it matters: Stock under 5 years old at sale gets nothing under the old rules.

Source: IRC 1202(a)

Per-issuer gain cap

Excluded gain per company is capped at the greater of $15 million ($10 million for older stock) or 10 times basis.

Why it matters: Gain above the cap is taxed normally; the cap is per taxpayer.

Source: IRC 1202(b)

Gross asset test

The corporation's gross assets cannot exceed $75 million ($50 million for older stock) at and before issuance.

Why it matters: Determines whether the stock ever qualified.

Source: IRC 1202(d)(1)

Active business and excluded fields

At least 80% of assets must be used in an active business; health, law, accounting, consulting, finance, hospitality, farming and similar fields are excluded.

Why it matters: Many service and farm businesses cannot use the exclusion.

Source: IRC 1202(e)

Stacking by gift

Stock given to family or non-grantor trusts keeps its status, and each holder has its own cap.

Why it matters: Gifting before a sale can multiply the excluded amount.

Source: IRC 1202(h)

Section 1045 rollover

Gain on qualified small business stock held over 6 months can be deferred by buying new qualifying stock within 60 days.

Why it matters: Preserves deferral when stock is sold before the holding period for exclusion is met.

Source: IRC 1045(a)

Contribution to an operating partnership

Contributing property (often after a 1031 into a Delaware statutory trust) to a REIT's operating partnership for partnership units is tax-deferred.

Why it matters: Gives diversification and liquidity later, but converting units to REIT shares is taxable and ends 1031 options.

Source: IRC 721(a)

Exchange funds and the investment company rule

Contributing stock or securities to a partnership that is an investment company is taxable unless the portfolio is not diversified by the contribution.

Why it matters: Determines whether an exchange fund defers gain on a concentrated stock position.

Source: IRC 721(b), 351(e)

Replacement period

After condemnation, casualty or threat of condemnation, gain is deferred if proceeds are reinvested within 2 years after the year of gain (3 years for condemned business or investment real estate).

Why it matters: A sale under threat of eminent domain can be deferred with more time than a 1031.

Source: IRC 1033(a)(2)(B), 1033(g)(4)

Replacement property standard

Replacement must be similar or related in service or use, except condemned business or investment real estate, which only needs to be like-kind.

Why it matters: Defines what the proceeds can buy.

Source: IRC 1033(a), 1033(g)

Constructive sale rule

Short sales against the box, offsetting notional principal contracts and some forward or collar positions on appreciated stock are treated as sales.

Why it matters: Hedging a concentrated position too tightly triggers the gain without a sale.

Source: IRC 1259

Prepaid variable forward contract

A forward sale with an upfront payment and a variable share count is not a sale or constructive sale when the share range is meaningful and delivery is not fixed.

Why it matters: Can raise cash now and defer gain until settlement.

Source: Rev. Rul. 2003-7 (2003-5 I.R.B. 363)

Long-term lease as real property

A leasehold of 30 years or more is like-kind to a fee interest in real property.

Why it matters: Lets a sale-leaseback or a long ground lease fit into a 1031.

Source: Treas. Reg. 1.1031(a)-1(c)

Net unrealized appreciation

Employer stock distributed in a lump sum from a 401(k) is taxed on its basis now and on the appreciation as long-term gain when sold.

Why it matters: Owners with company stock in a plan can turn ordinary withdrawals into capital gain.

Source: IRC 402(e)(4)

Roth conversion in low-income payment years

Converting IRA money to a Roth is taxed as ordinary income in the conversion year.

Why it matters: Payment years with spare low-bracket room are cheap years to convert; the sale year usually is not.

Source: IRC 408A(d)(3)

Moving to Puerto Rico before a sale

Gain on property owned before becoming a bona fide Puerto Rico resident remains U.S.-source for appreciation built up before the move (10-year rule).

Why it matters: A move shortly before a sale does not shelter the pre-move gain from federal tax.

Source: Treas. Reg. 1.937-2(f)

Oil and gas working interests

Intangible drilling costs can be deducted in the year paid, and losses from a working interest held without limited liability are not passive.

Why it matters: Used to offset sale-year ordinary income; later income and recapture are ordinary.

Source: IRC 263(c), 469(c)(3)

Clean energy investment credit

The investment credit is not available for wind and solar property placed in service after 2027, except projects that began construction by July 4, 2026 (P.L. 119-21); passive investors can use credits only against passive income.

Why it matters: Narrows the window for using energy credits to offset sale-year tax.

Source: IRC 48E(e)(5); P.L. 119-21

Monetized installment sale

An intermediary buys the property for a note, resells to the real buyer, and the seller gets a loan funded by the buyer's cash.

Why it matters: The IRS has proposed treating it as a listed transaction; still proposed as of October 2026.

Source: Prop. Reg. 1.6011-13

Self-cancelling installment note

A note to a family buyer that cancels at the seller's death; it needs a premium in price or interest.

Why it matters: Removes the unpaid balance from the estate, but cancellation is a disposition and the deferred gain is still taxed.

Source: IRC 453B(f)

Short-term AFR

The minimum rate for notes of 3 years or less.

Why it matters: Below it, part of principal is recharacterized as interest.

Source: Rev. Rul. 2026-19

Mid-term AFR

The minimum rate for notes over 3 and up to 9 years.

Why it matters: Most seller-financed business notes fall here.

Source: Rev. Rul. 2026-19

Long-term AFR

The minimum rate for notes over 9 years.

Why it matters: Long real estate notes must carry at least this rate.

Source: Rev. Rul. 2026-19

Lowest AFR of a 3-month window

For a sale, the test rate is the lowest AFR in the 3-month period ending with the month of a binding contract.

Why it matters: Signing when rates are about to rise can lock in a lower minimum note rate.

Source: IRC 1274(d)(2)

Imputed interest when the rate is too low

If stated interest is below the AFR, part of the principal is treated as interest.

Why it matters: Converts capital gain into ordinary interest income and changes the buyer's basis.

Source: IRC 1274(b)-(c), 483

Which imputed interest rule applies

Section 1274 (accrual of original issue discount) applies to most notes; Section 483 applies when the sale price is $250,000 or less and to certain exempt sales.

Why it matters: Under 1274 a seller can owe tax on interest accrued but not yet paid.

Source: IRC 1274(c)(3)(C)

Small sale exception

Sales of $3,000 or less are outside the imputed interest rules.

Why it matters: Irrelevant for big sales but sets the floor.

Source: IRC 483(d)(2)

Farm sale exception from Section 1274

An individual's sale of a farm for $1 million or less uses Section 483 instead of 1274.

Why it matters: Smaller farm sellers avoid accrual-method interest on the note.

Source: IRC 1274(c)(3)(A)

Principal residence exception from Section 1274

An individual's sale of a principal residence uses Section 483 instead of 1274.

Why it matters: Changes interest timing on seller-financed home sales.

Source: IRC 1274(c)(3)(B)

9% cap for qualified debt instruments

For notes with principal up to the annual limit, the imputed interest test rate cannot exceed 9%.

Why it matters: Caps the required rate if AFRs ever exceed 9%.

Source: Rev. Proc. 2025-32 sec. 4.40; IRC 1274A(b)

Cash method election

For notes up to the annual limit, buyer and seller can jointly elect to report interest when paid instead of as it accrues.

Why it matters: Lets a seller avoid paying tax on interest before it is received.

Source: Rev. Proc. 2025-32 sec. 4.40; IRC 1274A(c)

Related-party land sale rate cap

Sales of land between family members use a 6% test rate on up to $500,000 of sales a year.

Why it matters: Allows a lower note rate on family land sales.

Source: IRC 483(e)

Stated interest rate on the seller note

The stated rate the buyer pays on your note.

Why it matters: Higher rate means more ordinary interest income and more total cash; it must be at least the AFR.

Source: IRC 1274(d)

Note term

How many years the buyer takes to pay.

Why it matters: A longer term spreads gain over more tax years but extends credit risk; it also sets which AFR applies.

Source: IRC 1274(d)(1)(A)

Amortization and balloon

Whether principal is paid evenly or mostly at the end in a balloon.

Why it matters: A balloon pushes most of the gain into one later year, which can land it in higher brackets.

Source: IRC 453(c)

Prepayment and early payoff

Whether and when the buyer can pay the note off early, with or without a penalty.

Why it matters: An early payoff brings all remaining gain into that year.

Source: IRS Pub. 537

IRS underpayment interest rate

The rate the IRS charges on unpaid tax; it also drives the Section 453A charge and the estimated tax penalty.

Why it matters: Sets the cost of deferring tax through the interest charge or of underpaying estimates.

Source: IR-2026-98; IRC 6621

Reinvestment return

What sale proceeds or after-tax cash earn once invested.

Why it matters: The value of deferral depends on earning a return on the tax not yet paid.

Source: IRC 61(a) (investment income taxed as earned)

Discount rate for comparing years

The rate used to turn future taxes and payments into today's dollars.

Why it matters: Deferral is worth more at higher discount rates; nominal comparisons overstate late payments.

Source: IRC 7520 (IRS valuation rate, for reference)

Interest rate on debt kept or paid off

The rate on the mortgage or business loan that the sale pays off, or that you keep while taking a note.

Why it matters: Taking a note while keeping a loan at a higher rate can cost more than the tax deferred; a cash carve-out to pay debt plus a note is often compared.

Source: IRC 163(a)

Cash-out refinance before the sale

Borrowing against the property before selling; loan proceeds are not income.

Why it matters: Raises cash without tax, but debt the buyer assumes over basis is a payment, and a loan tied to a 1031 can be boot.

Source: Treas. Reg. 15a.453-1(b)(3)(i)

Interest tracing

Interest deductibility follows how loan proceeds are used, not what secures the loan.

Why it matters: Refinance cash spent personally gives nondeductible interest; invested cash gives investment interest.

Source: Temp. Reg. 1.163-8T

Investment interest limit

Investment interest is deductible only up to net investment income; capital gain counts only if you elect to give up its lower rate.

Why it matters: Borrowing to invest sale proceeds may not produce a usable deduction.

Source: IRC 163(d)

Business interest limit

Business interest is limited to 30% of adjusted taxable income for businesses above the gross receipts test.

Why it matters: Affects buyers and sellers of larger businesses with heavy debt.

Source: IRC 163(j); Rev. Proc. 2025-32 sec. 4.30

Prepayment penalty on existing debt

A fee to pay off the seller's loan early at closing.

Why it matters: Reduces net proceeds; generally treated as interest or a cost of the sale, so ask your CPA.

Source: IRC 163(a)

Debt relief in a foreclosure or short sale

Nonrecourse debt relieved counts fully in amount realized; recourse debt over value is cancellation of debt income.

Why it matters: A distressed sale can create taxable gain or ordinary income with no cash.

Source: Treas. Reg. 1.1001-2

Social Security tax thresholds (single)

Up to 50% of benefits become taxable when provisional income passes $25,000, and up to 85% above $34,000.

Why it matters: Gain and note interest raise provisional income, so a sale year makes up to 85% of benefits taxable.

Source: IRC 86(c)

Social Security tax thresholds (joint)

For joint filers the 50% tier starts at $32,000 and the 85% tier at $44,000.

Why it matters: Most selling couples have 85% of benefits taxed in every payment year; spreading rarely helps here.

Source: IRC 86(c)

Married filing separately and living together

A married person filing separately who lived with a spouse during the year has a $0 threshold.

Why it matters: Up to 85% of benefits are taxable from the first dollar.

Source: IRC 86(c)(1)(C)

Provisional income

Modified AGI plus tax-exempt interest plus half of Social Security benefits.

Why it matters: Municipal bond interest bought with sale proceeds still counts.

Source: IRC 86(b)

Maximum taxable share of benefits

No more than 85% of benefits are ever taxable.

Why it matters: Caps the extra tax a sale can cause on benefits.

Source: IRC 86(a)(2)

IRMAA tier 1 (single)

Single filers with MAGI over $109,000 two years earlier pay a Part B premium of $284.10 a month plus $14.50 for Part D.

Why it matters: IRMAA is a cliff: one dollar over the line raises the premium for the whole year; a one-year sale often lands in the top tier.

Source: CMS 2026 Medicare premiums fact sheet

IRMAA tier 1 (joint)

Joint filers with MAGI over $218,000 two years earlier pay $284.10 a month per person for Part B plus $14.50 for Part D.

Why it matters: Both spouses pay the surcharge; spreading gain can keep later years under a tier.

Source: CMS 2026 Medicare premiums fact sheet

IRMAA tier 2 (single)

Single filers with MAGI over $137,000 two years earlier pay a Part B premium of $405.80 a month plus $37.50 for Part D.

Why it matters: IRMAA is a cliff: one dollar over the line raises the premium for the whole year; a one-year sale often lands in the top tier.

Source: CMS 2026 Medicare premiums fact sheet

IRMAA tier 2 (joint)

Joint filers with MAGI over $274,000 two years earlier pay $405.80 a month per person for Part B plus $37.50 for Part D.

Why it matters: Both spouses pay the surcharge; spreading gain can keep later years under a tier.

Source: CMS 2026 Medicare premiums fact sheet

IRMAA tier 3 (single)

Single filers with MAGI over $171,000 two years earlier pay a Part B premium of $527.50 a month plus $60.40 for Part D.

Why it matters: IRMAA is a cliff: one dollar over the line raises the premium for the whole year; a one-year sale often lands in the top tier.

Source: CMS 2026 Medicare premiums fact sheet

IRMAA tier 3 (joint)

Joint filers with MAGI over $342,000 two years earlier pay $527.50 a month per person for Part B plus $60.40 for Part D.

Why it matters: Both spouses pay the surcharge; spreading gain can keep later years under a tier.

Source: CMS 2026 Medicare premiums fact sheet

IRMAA tier 4 (single)

Single filers with MAGI over $205,000 two years earlier pay a Part B premium of $649.20 a month plus $83.30 for Part D.

Why it matters: IRMAA is a cliff: one dollar over the line raises the premium for the whole year; a one-year sale often lands in the top tier.

Source: CMS 2026 Medicare premiums fact sheet

IRMAA tier 4 (joint)

Joint filers with MAGI over $410,000 two years earlier pay $649.20 a month per person for Part B plus $83.30 for Part D.

Why it matters: Both spouses pay the surcharge; spreading gain can keep later years under a tier.

Source: CMS 2026 Medicare premiums fact sheet

IRMAA tier 5 (single)

Single filers with MAGI of $500,000 or more two years earlier pay a Part B premium of $689.90 a month plus $91.00 for Part D.

Why it matters: IRMAA is a cliff: one dollar over the line raises the premium for the whole year; a one-year sale often lands in the top tier.

Source: CMS 2026 Medicare premiums fact sheet

IRMAA tier 5 (joint)

Joint filers with MAGI of $750,000 or more two years earlier pay $689.90 a month per person for Part B plus $91.00 for Part D.

Why it matters: Both spouses pay the surcharge; spreading gain can keep later years under a tier.

Source: CMS 2026 Medicare premiums fact sheet

IRMAA tiers (married filing separately)

Separate filers who lived with a spouse jump straight to the two highest tiers.

Why it matters: Filing separately in a sale year is costly for Medicare premiums.

Source: CMS 2026 Medicare premiums fact sheet

Standard Part B premium

The base monthly Part B premium everyone pays before any surcharge.

Why it matters: The baseline against which sale-driven surcharges are measured.

Source: CMS 2026 Medicare premiums fact sheet

Two-year lookback

Premiums for a year are based on the tax return from two years earlier.

Why it matters: A 2026 sale raises premiums in 2028; timing a sale can control which years pay.

Source: 42 U.S.C. 1395r(i)(4)

MAGI for IRMAA

Adjusted gross income plus tax-exempt interest.

Why it matters: All recognized gain counts; only reducing AGI (losses, deferral) lowers it.

Source: 42 U.S.C. 1395r(i)(4)(A)

Life-changing event appeal

Form SSA-44 lets you use a more recent year's income after events like work stoppage, death of a spouse, or loss of income-producing property; a planned sale is not one.

Why it matters: Retiring and selling a business can sometimes qualify through work stoppage; the gain itself does not.

Source: 20 CFR 418.1205

400% of poverty line cliff

From 2026, premium tax credits end entirely for household income above 400% of the federal poverty line.

Why it matters: A pre-65 seller buying Marketplace coverage can lose the whole credit in a sale year; spreading may keep later years under the cliff.

Source: IRC 36B(c)(1)(A)

Federal poverty line for 2026 coverage

The 2025 poverty guideline used for 2026 coverage: $15,650 for one person plus $5,500 per additional person (48 states).

Why it matters: 400% is $62,600 single or $84,600 for a couple.

Source: HHS 2025 poverty guidelines (used for 2026 coverage)

Required contribution percentage

Below the cliff, you pay a benchmark premium of up to 9.96% of household income.

Why it matters: Each dollar of gain under the cliff raises your premium share.

Source: Rev. Proc. 2025-25 sec. .01

Full repayment of excess advance credits

Starting 2026, advance credits received above what you qualify for must be repaid in full; the old repayment caps are gone.

Why it matters: Not reporting expected sale income to the Marketplace can mean repaying a year of subsidies at tax time.

Source: IRC 36B(f)(2); Rev. Proc. 2025-32 sec. 2.04

Household income for ACA

MAGI plus tax-exempt interest and the nontaxable part of Social Security for everyone in the household.

Why it matters: Sale gain and note interest count in the year recognized.

Source: IRC 36B(d)(2)(B)

Earnings test before full retirement age

Benefits are withheld when wages or self-employment income exceed an annual limit before full retirement age; sale gain and interest are not earnings.

Why it matters: Consulting pay from the buyer can reduce early benefits; price paid as gain does not.

Source: 42 U.S.C. 403(b), (f)

Estate and gift tax exclusion

The amount each person can pass free of federal estate and gift tax.

Why it matters: Most sellers fall under it, so income tax and step-up planning matter more than estate tax.

Source: IRC 2010(c)(3); Rev. Proc. 2025-32

Top estate and gift tax rate

Taxable estates above the exclusion pay 40% on the excess.

Why it matters: For very large estates, sale proceeds and notes both count at full value.

Source: IRC 2001(c)

Portability of a spouse's unused exclusion

A surviving spouse can use the deceased spouse's unused exclusion if an estate tax return is filed.

Why it matters: Lets a couple shelter up to $30 million; late elections are allowed up to 5 years after death under a simplified procedure.

Source: IRC 2010(c)(4)-(5); Rev. Proc. 2022-32

Annual gift exclusion

Gifts up to this amount per recipient per year are not taxable gifts.

Why it matters: Lets owners shift business shares or note interests to heirs gradually before or after a sale.

Source: Rev. Proc. 2025-32 sec. 4.42

Gifts to a noncitizen spouse

Gifts to a spouse who is not a U.S. citizen are excluded only up to an annual limit, and the estate marital deduction needs a qualified domestic trust.

Why it matters: Changes how sale proceeds can be moved between spouses.

Source: Rev. Proc. 2025-32 sec. 4.42(2)

Generation-skipping transfer exemption

Amount that can pass to grandchildren or long-term trusts without the separate 40% GST tax.

Why it matters: Matters for dynasty trust planning with sale proceeds.

Source: Rev. Proc. 2025-32 sec. 2.14

Unlimited marital deduction

Property passing to a U.S. citizen spouse is not subject to estate tax.

Why it matters: Defers estate tax to the second death, when step-up planning matters again.

Source: IRC 2056(a)

Alternate valuation date

The estate can value assets 6 months after death if that lowers both the estate and the tax.

Why it matters: Also sets the heirs' basis in that property.

Source: IRC 2032

Step-up in basis at death

Inherited property takes a basis equal to its value at death.

Why it matters: Holding appreciated property until death can erase the built-up gain, the main rival to selling now.

Source: IRC 1014(a)

Community property double step-up

In community property states both halves of community property get a new basis when the first spouse dies.

Why it matters: A surviving spouse can sell soon after with little gain.

Source: IRC 1014(b)(6)

Spousal joint tenancy

For spouses holding as joint tenants, only half the property is included in the first estate and stepped up.

Why it matters: Leaves more gain on a later sale than community property.

Source: IRC 2040(b)

Carryover basis on gifts

Property received by gift keeps the donor's basis.

Why it matters: Gifting appreciated property before a sale moves the gain, it does not erase it.

Source: IRC 1015(a)

Installment note at death

An unpaid installment note is income in respect of a decedent; it gets no step-up and heirs pay tax on the gain as collected.

Why it matters: Selling on terms gives up the step-up a held asset would get.

Source: IRC 691(a)(4), 1014(c)

Deduction for estate tax on IRD

Heirs who report income in respect of a decedent can deduct the estate tax caused by it.

Why it matters: Softens double tax for taxable estates holding notes.

Source: IRC 691(c)

Deferred 1031 gain at death

Replacement property from exchanges gets a step-up at death, so deferred gain from every past exchange is never taxed.

Why it matters: Exchanging until death can beat any sale strategy for heirs.

Source: IRC 1014(a)

Assets in a grantor trust outside the estate

Assets given to an irrevocable grantor trust do not get a step-up at the grantor's death.

Why it matters: Shifting appreciated property out of the estate trades away the step-up.

Source: Rev. Rul. 2023-2

Sale to an intentionally defective grantor trust

Selling property to your own grantor trust for a note is ignored for income tax, so no gain is recognized and interest is not taxed.

Why it matters: Freezes estate value while you pay the trust's income tax; the asset gets no step-up.

Source: IRC 671, 675

Power to swap assets

A power to reacquire trust assets by substituting assets of equal value.

Why it matters: Lets a grantor swap low-basis trust assets back into the estate to get a step-up.

Source: IRC 675(4)(C)

Special use valuation cap

Farm or business real property can be valued at its use value instead of market value, reducing the estate by up to an annual limit.

Why it matters: Cuts estate tax for heirs who keep farming the land.

Source: Rev. Proc. 2025-32 sec. 4.41

Special use valuation tests

Farm or business assets must be at least 50% of the adjusted estate and the real property at least 25%, with material participation in 5 of the 8 years before death.

Why it matters: Determines whether heirs can use the lower valuation.

Source: IRC 2032A(b)

Special use recapture

If heirs sell the land or stop the qualified use within 10 years, the estate tax saved is recaptured.

Why it matters: Limits heirs' ability to sell inherited farmland soon after death.

Source: IRC 2032A(c)

Estate tax deferral eligibility

If a closely held business is more than 35% of the adjusted gross estate, estate tax on it can be paid over time.

Why it matters: Lets heirs keep the business instead of selling to pay tax.

Source: IRC 6166(a)(1)

Estate tax deferral schedule

Interest-only for up to 5 years, then up to 10 annual installments.

Why it matters: Spreads the tax over as long as 14 years.

Source: IRC 6166(a)(3)

2% interest portion

Interest on deferred estate tax is 2% on the tax attributable to the first part of the business value; the rest bears 45% of the underpayment rate.

Why it matters: Makes deferral cheap financing for heirs.

Source: Rev. Proc. 2025-32 sec. 4.51

Inherited retirement account 10-year rule

Most non-spouse heirs must empty an inherited IRA or 401(k) within 10 years.

Why it matters: Heirs' own brackets decide whether leaving retirement money or sale proceeds is better.

Source: IRC 401(a)(9)(H)

Gift timing versus a binding sale

Gifting an interest after a sale is effectively fixed leaves the gain taxed to the donor.

Why it matters: Shares or property must be given away before the deal is locked to shift gain.

Source: IRC 61(a)

Valuation discounts on family entities

Gifts of minority, non-marketable interests in a family entity are valued with discounts; certain restrictions are ignored.

Why it matters: Moves more value out of the estate before a sale at lower gift-tax value.

Source: IRC 2704

Capital loss limit against ordinary income

Net capital losses offset all capital gains, then only $3,000 ($1,500 separate) of other income a year.

Why it matters: Big gains can absorb carried losses in full; otherwise they trickle out.

Source: IRC 1211(b)

Capital loss carryforward

Unused capital losses carry forward with no time limit and keep their short- or long-term character.

Why it matters: Old losses can offset sale gain in the year it is recognized.

Source: IRC 1212(b)

Which gain a loss offsets first

Current-year long-term losses offset the 15%/20% gain first; net short-term losses and carryovers reduce 28% and then 25% gain first.

Why it matters: The kind of loss changes how much tax it saves.

Source: IRC 1(h)(4)(B), 1(h)(6)(A)

Capital loss carryover ends at death

Unused capital losses die with the taxpayer and cannot be used by the estate or heirs.

Why it matters: Losses should be used against gain while the owner is alive.

Source: IRS Pub. 559

Wash sale rule

A loss is disallowed if you buy substantially identical stock 30 days before or after the sale, including in an IRA.

Why it matters: Harvesting losses against sale gain must avoid repurchases inside the window.

Source: IRC 1091(a)

Unrealized losses in taxable accounts

Losses on investments you could sell in the sale year.

Why it matters: Realized by December 31, they offset gain dollar for dollar.

Source: IRC 1211(b)

Suspended passive losses

Rental or passive business losses carried forward because there was no passive income.

Why it matters: A taxable sale of the whole activity frees them against any income.

Source: IRC 469(b)

Release on full disposition

Selling your entire interest in a passive activity to an unrelated buyer in a taxable sale frees its suspended losses.

Why it matters: Freed losses can offset sale gain and ordinary income such as wages.

Source: IRC 469(g)(1)(A)

Release on an installment sale

On an installment sale, losses are freed each year in proportion to the gain recognized that year.

Why it matters: Spreading the sale also spreads the loss release.

Source: IRC 469(g)(3)

Sale to a related buyer

A sale to a related party does not free losses until the property leaves the related group.

Why it matters: Family sales keep losses locked.

Source: IRC 469(g)(1)(B)

Grouping and aggregation

Rentals grouped as one activity (or aggregated by a real estate professional) are one activity, so selling one building does not free losses.

Why it matters: Grouping choices made years ago decide whether a sale releases losses.

Source: Treas. Reg. 1.469-4

$25,000 rental allowance

Active-participation landlords can deduct up to $25,000 of rental losses, phased out between $100,000 and $150,000 of modified AGI.

Why it matters: Sale income wipes out the allowance in payment years.

Source: IRC 469(i)

Real estate professional status

One spouse must spend more than 750 hours and more than half of working time in real property businesses.

Why it matters: Makes rental income and gain nonpassive, which changes how losses and the 3.8% tax apply.

Source: IRC 469(c)(7)(B)

Material participation

Seven tests, such as more than 500 hours a year or 5 of the last 10 years.

Why it matters: Decides whether a business sale's gain is passive and subject to the 3.8% tax.

Source: Temp. Reg. 1.469-5T(a)

Self-rental recharacterization

Net rent and sale gain from property rented to your own active business is nonpassive.

Why it matters: Gain on a building leased to your company cannot absorb passive losses.

Source: Treas. Reg. 1.469-2(f)(6)

24-month rule for appreciated property

Appreciated property (value over 120% of basis) is nonpassive on sale unless it was passive for 20% of the holding period or the 24 months before the contract.

Why it matters: Retiring from active use and then selling quickly keeps the gain nonpassive.

Source: Treas. Reg. 1.469-2(c)(2)(iii)

Character fixed in the year of sale

Whether installment gain is passive is decided in the year of disposition and stays that way for later payments.

Why it matters: Later changes in participation do not change the character of payments.

Source: Temp. Reg. 1.469-2T(c)(2)(i)(A)

Investment land gain is portfolio income

Gain on land held for investment, not rented, is portfolio income.

Why it matters: Passive losses cannot offset it; capital losses can.

Source: IRC 469(e)(1)(A)(ii)

Suspended losses at death

At death, suspended losses are deductible only to the extent they exceed the basis step-up.

Why it matters: Unused losses can vanish if the owner holds until death.

Source: IRC 469(g)(2)

Suspended losses on a gift

Gifting a passive activity adds its suspended losses to the recipient's basis instead of freeing them.

Why it matters: Gifts before a sale do not unlock losses.

Source: IRC 469(j)(6)

Excess business loss limit

Net business losses above the threshold cannot offset nonbusiness income and become an NOL carryforward.

Why it matters: Large freed losses in a sale year can be capped.

Source: Rev. Proc. 2025-32 sec. 4.31; IRC 461(l)

Net operating loss 80% limit

Post-2017 NOLs carry forward indefinitely but offset only 80% of taxable income.

Why it matters: An NOL cannot fully zero out a sale year.

Source: IRC 172(a)(2)

At-risk limit

Losses are limited to the amount you have at risk in the activity.

Why it matters: On sale, previously disallowed at-risk losses can become usable against the gain.

Source: IRC 465

Partner and S corporation basis limits

Pass-through losses are limited to your basis in the partnership or S corporation stock.

Why it matters: Gain on sale increases basis and can free carried losses.

Source: IRC 704(d), 1366(d)

Section 1231 netting

Net gains on business property held over a year are capital gain; net losses are ordinary.

Why it matters: Selling loss properties in a separate year from gain properties can make the losses ordinary.

Source: IRC 1231(a)

Five-year lookback

Net 1231 gain is ordinary to the extent of unrecaptured net 1231 losses from the prior 5 years.

Why it matters: Old 1231 losses can turn part of this sale's gain into ordinary income.

Source: IRC 1231(c)

Loss on sale to a related party

A loss on selling property to a related person is disallowed.

Why it matters: Losses cannot be harvested through family sales.

Source: IRC 267(a)(1)

Closing date and tax year

A sale is generally taxed in the year title or the benefits and burdens pass, usually at closing.

Why it matters: Closing on December 31 versus January 2 moves the whole gain into a different tax year, IRMAA year and SALT year.

Source: IRS Pub. 544

Trade date for securities

Gain or loss on publicly traded securities is recognized on the trade date, not the settlement date.

Why it matters: Year-end harvesting must trade by December 31.

Source: IRS Pub. 550

Constructive receipt

Income is taxed when it is credited or made available to you without substantial restriction, even if not taken.

Why it matters: Proceeds left in an account you control are taxed now.

Source: Treas. Reg. 1.451-2(a)

Timing of the first note payment

Whether the first principal payment falls in the year of sale or the next year.

Why it matters: Pushing the first payment into January leaves only the down payment and recapture in the sale year.

Source: IRC 453(c)

Pass-through entity year end

Partners and S corporation owners report entity gain in their tax year that includes the entity's year end.

Why it matters: An entity with a fiscal year can shift when owners report the sale.

Source: IRC 706(a)

Prior-year safe harbor

Paying 100% of last year's tax (110% if last year's AGI was over $150,000, $75,000 separate) avoids an underpayment penalty.

Why it matters: A seller can pay based on last year and settle the sale-year tax by April 15 without penalty.

Source: IRC 6654(d)(1)(B)-(C)

Current-year safe harbor

Paying 90% of the current year's tax through estimates and withholding also avoids the penalty.

Why it matters: Rarely practical in a sale year, but sets the alternative.

Source: IRC 6654(d)(1)(B)(i)

Annualized income method

Installments can be based on income actually earned through each quarter.

Why it matters: A sale late in the year needs no extra estimates for earlier quarters.

Source: IRC 6654(d)(2); Form 2210 instructions

Withholding counts as paid evenly

Tax withheld from wages or IRA distributions is treated as paid evenly through the year unless you elect otherwise.

Why it matters: Extra December withholding can cure underpaid estimates for earlier quarters.

Source: IRC 6654(g)

Estimated tax due dates

Estimates are due April 15, June 15, September 15 and January 15.

Why it matters: The quarter of closing decides which payments must include the sale.

Source: IRC 6654(c)

Charitable bunching in the sale year

Concentrating several years of gifts into the high-income sale year.

Why it matters: Gifts are worth the most when income is highest, subject to AGI limits and the 0.5% floor.

Source: IRC 170(b)

Required minimum distribution age

IRA and 401(k) withdrawals must begin at 73 (75 for people born in 1960 or later).

Why it matters: RMDs stack on top of sale income in payment years.

Source: IRS retirement topics: RMDs

Qualified charitable distribution

Owners 70 1/2 or older can give IRA money directly to charity and exclude it from income, up to an inflation-indexed annual limit.

Why it matters: Lowers AGI (and IRMAA) in payment years without itemizing.

Source: IRC 408(d)(8)

Sale price

Total consideration for the property or business.

Why it matters: Drives the gain and every threshold.

Source: IRC 1001(b)

Adjusted basis

Cost plus improvements minus depreciation.

Why it matters: Lower basis means more gain.

Source: IRC 1011, 1016

Selling costs

Commissions, legal, title and transfer costs.

Why it matters: Reduce the amount realized and the gain.

Source: IRC 1001(a)

What is being sold

Real estate, an operating business, farm or stock.

Why it matters: Determines recapture, installment eligibility, 3.8% exposure and 1031 options.

Source: IRC 1221, 1231

Dealer versus investor status

Whether you held property for sale to customers.

Why it matters: Dealer gain is ordinary and cannot use installment or 1031 treatment.

Source: IRC 1221(a)(1)

C corporation rate

C corporations pay a flat 21% on their gain.

Why it matters: An asset sale inside a C corporation is taxed twice: 21% at the company, then again on distribution.

Source: IRC 11(b)

Stock sale versus asset sale

Selling shares instead of the company's assets.

Why it matters: A stock sale gives the seller one level of capital gain; buyers pay less because they get no basis step-up.

Source: IRC 1001; IRC 1060

S corporation built-in gains tax

A former C corporation that converted to S pays 21% corporate tax on built-in gains sold within 5 years.

Why it matters: Selling within the recognition period adds a corporate-level tax.

Source: IRC 1374(d)(7)

Section 338(h)(10) election

Stock sale of an S corporation or subsidiary treated as an asset sale for tax.

Why it matters: Buyer gets a step-up; seller may get recapture and ordinary income on hot assets, and can price for it.

Source: IRC 338(h)(10)

Section 336(e) election

Similar deemed asset sale election that does not require a corporate buyer.

Why it matters: Lets an S corporation stock sale to individuals or private equity funds give the buyer a step-up.

Source: IRC 336(e)

Purchase price allocation

Price is allocated across seven asset classes by the residual method and reported on Form 8594.

Why it matters: Each dollar shifted to equipment or inventory is ordinary income; to goodwill, capital gain.

Source: IRC 1060(a)

Asset classes I to VII

Cash, securities, receivables, inventory, equipment and real estate, intangibles, and goodwill in order.

Why it matters: The class mix sets the ordinary versus capital split.

Source: Form 8594 instructions

Personal versus corporate goodwill

Goodwill owned by the owner personally (relationships, no non-compete with the company) can be sold directly.

Why it matters: Avoids the corporate-level tax in a C corporation asset sale.

Source: IRC 197; IRC 1060

Covenant not to compete

Payment for agreeing not to compete.

Why it matters: Ordinary income to the seller, not capital gain.

Source: IRC 197(d)(1)(E)

Consulting or employment agreement

Payments for post-sale services.

Why it matters: Ordinary wages or self-employment income with payroll tax instead of capital gain.

Source: IRC 61(a)(1)

Earn-out

Extra price paid if the business hits targets after closing.

Why it matters: Taxed as installment sale gain when received if written as purchase price; as wages if tied to continued work.

Source: Treas. Reg. 15a.453-1(c)

Indemnity escrow

Part of the price held for claims for a set period.

Why it matters: Generally taxed when released if truly at risk; a forfeiture reduces the price.

Source: Treas. Reg. 15a.453-1(c)

Rollover equity

Part of the price taken as equity in the buyer.

Why it matters: Can be tax-deferred if done as a contribution to a partnership or a qualifying corporate exchange.

Source: IRC 721; IRC 351

Partnership hot assets

On selling a partnership interest, your share of receivables, inventory and recapture is ordinary income.

Why it matters: That part is taxed at ordinary rates in the year of sale.

Source: IRC 751(a)

Partnership debt relief

Your share of partnership liabilities is part of the amount realized on selling the interest.

Why it matters: Can create gain or tax above the cash received.

Source: IRC 752(d)

Cash-basis receivables

Unbilled or uncollected receivables of a cash-method business.

Why it matters: Sold receivables are ordinary income in full.

Source: IRC 1221(a)(4)

Corporate liquidation

Shareholders treat liquidating distributions as payment for their stock.

Why it matters: After a C corporation asset sale, liquidation brings the second tax.

Source: IRC 331

Installment notes distributed in liquidation

Shareholders receiving a buyer's note in a liquidation within 12 months of adopting the plan can report on the installment method.

Why it matters: Lets a corporate asset sale on terms pass deferral to shareholders.

Source: IRC 453(h)

Pass-through entity tax election

A partnership or S corporation can pay state tax at the entity level and deduct it federally.

Why it matters: Gets around the SALT cap on the state tax on a sale run through the entity.

Source: Notice 2020-75

Foreign seller withholding

Buyers must withhold 15% of the price when the seller of U.S. real property is a foreign person.

Why it matters: Ties up cash until the return is filed.

Source: IRC 1445(a)

Filing status

Married joint, single, head of household or separate.

Why it matters: Sets every bracket, threshold and IRMAA tier.

Source: IRC 1(j)

Survivor filing status

A surviving spouse can file jointly for the year of death, then as single (or qualifying surviving spouse with a dependent child for 2 years).

Why it matters: Payments received after a spouse dies hit single brackets, a reason to plan the term.

Source: IRC 2(a)

Age of each spouse

Ages drive the senior deduction, Medicare, RMDs and Social Security timing.

Why it matters: Changes the cost of each year's income.

Source: IRC 63(f)

Life expectancy and health

How long you expect to receive payments or hold property.

Why it matters: A shorter horizon favors holding for the step-up; a long horizon favors spreading.

Source: IRC 7520 (tables)

Spending needs

Cash needed each year from the sale.

Why it matters: Sets how much can be taken over time versus at closing.

Source: IRC 453 (payments set the tax)

Other ordinary income

Wages, pensions, IRA withdrawals and rents in each year.

Why it matters: Gain stacks on top, so other income decides the gain's bracket.

Source: IRC 61(a)

Social Security benefit and claiming age

Annual benefit and when it starts.

Why it matters: Benefits become up to 85% taxable when sale income is present.

Source: IRC 86

Charitable intent

How much you want to leave or give to charity.

Why it matters: Makes trusts and gifts of appreciated property worth modeling.

Source: IRC 170

Heirs and their tax brackets

Who inherits and their own tax rates.

Why it matters: Decides whether holding for the step-up or selling now leaves them more.

Source: IRC 1014

State of residence

Where you live in each payment year.

Why it matters: State tax on gain can be as large as the federal capital gain tax; see the state rules.

Source: IRC 164 (state tax deduction limits)

Home sale exclusion

Gain on a main home is excluded up to $250,000 ($500,000 joint).

Why it matters: Applies to a farm or ranch house, or a building with living quarters, sold with the business.

Source: IRC 121(b)

Ownership and use test

You must own and live in the home 2 of the 5 years before sale.

Why it matters: Moving out more than 3 years before sale loses the exclusion.

Source: IRC 121(a)

Depreciation on a home not excluded

Depreciation taken after May 6, 1997 (home office or rental use) is taxed even within the exclusion.

Why it matters: Part of a former rental's gain stays taxable at up to 25%.

Source: IRC 121(d)(6)

Nonqualified use

Periods after 2008 when the home was not your main home reduce the excludable gain proportionally.

Why it matters: Converting a rental into a home before selling gets only partial exclusion.

Source: IRC 121(b)(5)

Current Ordinary Income

Why it matters: Establishes the baseline marginal tax bracket for non-capital gain income.

Source: IRC 61 (Cornell LII); cited as § 61

Current Capital Gains Income

Why it matters: Determines whether the seller hits the 15% or 20% long-term capital gains tier.

Source: IRC 1 (Cornell LII); cited as § 1(h)

Social Security Benefits Received

Why it matters: High sale income will trigger up to 85% of Social Security benefits to become taxable.

Source: IRC 86 (Cornell LII); cited as § 86

NIIT: Trade or Business Exception

Why it matters: Determines if the asset sold is exempt from the 3.8% NIIT (e.g., active business asset).

Source: IRC 1411 (Cornell LII); cited as § 1411(c)(1)(A)

AMT Preference Items

Why it matters: Existing preference items combined with the sale can push the seller into AMT.

Source: IRC 57 (Cornell LII); cited as § 57

§ 1014 Step-up Intent

Why it matters: Decides whether the primary strategy is tax deferral until death to eliminate CG tax.

Source: IRC 1014 (Cornell LII); cited as § 1014

Prior Lifetime Gifts Used

Why it matters: Reduces the available lifetime estate tax exemption.

Source: IRC 2505 (Cornell LII); cited as § 2505

Entity Type: Sole Prop (Sch C/F)

Why it matters: Assets are sold individually; no entity-level wrapper to sell as stock.

Source: IRC 162 (Cornell LII); cited as § 162

Transaction: Asset Sale

Why it matters: Generally favors buyer (step-up) and penalizes seller (ordinary income recapture).

Source: IRC 1060 (Cornell LII); cited as § 1060

Transaction: Stock/Equity Sale

Why it matters: Favors seller (all capital gain) but leaves buyer with historical depreciation schedules.

Source: IRC 1001 (Cornell LII); cited as § 1001

Total Purchase Price

Why it matters: The gross consideration determining the total realization event.

Source: IRC 1001 (Cornell LII); cited as § 1001

Goodwill Type (Enterprise)

Why it matters: Belongs to the entity and is taxed according to the entity's structure.

Source: IRC 197 (Cornell LII); cited as § 197

§ 1245 Recapture Basis

Why it matters: Forces accumulated depreciation on personal property to be taxed as ordinary income.

Source: IRC 1245 (Cornell LII); cited as § 1245

§ 1231 Current Year Netting

Why it matters: Determines if net business asset gains are treated as capital gains or ordinary losses.

Source: IRC 1231 (Cornell LII); cited as § 1231

§ 1231 5-Year Lookback

Why it matters: Converts current § 1231 capital gains to ordinary income if prior ordinary losses exist.

Source: IRC 1231 (Cornell LII); cited as § 1231(c)

§ 179 Recapture Amount

Why it matters: Triggers ordinary income if business use dropped before the sale.

Source: IRC 179 (Cornell LII); cited as § 179(d)(10)

Bonus Depr. Recapture

Why it matters: 100% bonus (restored by 2025 Act) creates massive ordinary income upon sale.

Source: IRC 168 (Cornell LII); cited as § 168(k)

Depreciation Method Used

Why it matters: Determines the ratio of § 1245 vs § 1250 recapture required.

Source: IRC 167 (Cornell LII); cited as § 167 / § 168

Basis Allocation: Land

Why it matters: Non-depreciable; all appreciation is taxed as pure capital gain.

Source: IRC 1011 (Cornell LII); cited as § 1011

Basis Allocation: Building

Why it matters: Depreciable; splits gain between 25% unrecaptured § 1250 and 20% capital gain.

Source: IRC 1011 (Cornell LII); cited as § 1011

Holding Period (ST vs LT)

Why it matters: Must be >1 year for favorable long-term capital gains rates (or >5 years for QSBS).

Source: IRC 1222 (Cornell LII); cited as § 1222

Capital Loss Carryforwards

Why it matters: Can offset capital gains from the sale dollar-for-dollar.

Source: IRC 1212 (Cornell LII); cited as § 1212

Net Operating Loss (NOL)

Why it matters: Can offset up to 80% of taxable income (post-TCJA rule).

Source: IRC 172 (Cornell LII); cited as § 172

Existing Installment Notes

Why it matters: Must be factored into current tax brackets and remaining deferral timelines.

Source: IRC 453B (Cornell LII); cited as § 453B

Liabilities Assumed by Buyer

Why it matters: Treated as cash consideration received by the seller, increasing recognized gain.

Source: IRC 1001 (Cornell LII); cited as § 1001

Earnout / Contingent Pay

Why it matters: Requires complex basis recovery allocation rules (maximum price, fixed time, or 15-year).

Source: IRC 453 (Cornell LII); cited as § 453

§ 453 Installment Principal

Why it matters: Defers capital gain recognition proportionally as principal is received.

Source: IRC 453 (Cornell LII); cited as § 453

§ 453A Interest Charge (>$5M)

Why it matters: Imposes an IRS interest fee on deferred tax for installment notes exceeding $5M.

Source: IRC 453A (Cornell LII); cited as § 453A

§ 453A Farm Property Excep.

Why it matters: Exempts farm sales from the $5M threshold interest charge (critical for Ag sellers).

Source: IRC 453A (Cornell LII); cited as § 453A(b)(3)

§ 453B Disposition/Pledges

Why it matters: Pledging the note for a loan triggers immediate taxation of the deferred gain.

Source: IRC 453A (Cornell LII); cited as §453A(d) (pledge) and §453B (dispositions); Gemini cited only §453A(d)

§ 453(e) Related Party Resale

Why it matters: If a related buyer resells within 2 years, the original seller's deferred gain accelerates.

Source: IRC 453 (Cornell LII); cited as § 453(e)

Minimum Interest (AFR)

Why it matters: Failure to charge AFR converts capital gain into ordinary interest income (OID).

Source: IRC 483 (Cornell LII); cited as § 483 / § 1274

§ 1038 Repossession

Why it matters: Limits gain recognition if real property is repossessed following buyer default.

Source: IRC 1038 (Cornell LII); cited as § 1038

1031: Replacement Target

Why it matters: Must be equal or greater than relinquished property value to fully defer gain.

Source: IRC 1031 (Cornell LII); cited as § 1031

1031: Cash Boot Received

Why it matters: Any cash taken out of the exchange is taxable up to the amount of realized gain.

Source: IRC 1031 (Cornell LII); cited as § 1031(b)

1031: Mortgage Boot

Why it matters: Failure to replace debt with new debt (or out-of-pocket cash) triggers taxable boot.

Source: IRC 1031 (Cornell LII); cited as § 1031(d)

Related Party 1031

Why it matters: Requires both parties to hold their properties for 2 years post-exchange.

Source: IRC 1031 (Cornell LII); cited as § 1031(f)

1031: 45-Day ID Risk

Why it matters: Strict deadline; failure to identify means immediate taxation of the sale.

Source: IRC 1031 (Cornell LII); cited as § 1031(a)(3)(A)

1031: 180-Day Close Risk

Why it matters: Strict deadline; failure to close means exchange fails.

Source: IRC 1031 (Cornell LII); cited as § 1031(a)(3)(B)

Non-Like-Kind Boot

Why it matters: Receiving personal property, seller notes, or non-qualifying assets alongside real estate triggers boot.

Source: IRC 1031 (Cornell LII); cited as §1031(b)

Non-Recourse Debt Allocation

Why it matters: Debt must be properly allocated to investors' basis to ensure they don't trigger debt-relief boot upon entry.

Source: IRC 752 (Cornell LII); cited as §752

Independent Trustee Fees

Why it matters: Ongoing AUM and trustee administration fees (often 1-2% annually) erode the mathematical benefit of the tax deferral.

Source: IRC 453 (Cornell LII); cited as IRC §453

CRAT vs CRUT

Why it matters: A fixed annuity (CRAT) vs a fixed percentage of annual valuation (CRUT) changes downside risk and inflation protection.

Source: IRC 664 (Cornell LII); cited as §664

Payout Rate Limits

Why it matters: The trust must pay at least 5% but no more than 50% to the non-charitable beneficiary annually.

Source: IRC 664 (Cornell LII); cited as §664(d)

§7520 Discount Rate

Why it matters: The chosen IRS discount rate (current month or 2 prior months) massively impacts the calculated charitable deduction.

Source: IRC 7520 (Cornell LII); cited as §7520(a)

UBTI Excise Tax

Why it matters: Unrelated Business Taxable Income within a CRT is subject to a 100% excise tax, destroying tax-exempt growth.

Source: IRC 664 (Cornell LII); cited as §664(c)(2)

Debt-Encumbered Property

Why it matters: Contributing mortgaged property triggers bargain sale rules and risks classifying the CRT as a grantor trust.

Source: IRC 641 (Cornell LII); cited as §641 / §1011

Self-Dealing Rules

Why it matters: Strict prohibition on sales, leases, or loans between the CRT and disqualified persons (including the seller).

Source: IRC 4941 (Cornell LII); cited as §4941

NIMCRUT Make-Up

Why it matters: Net Income with Make-up CRUTs only pay actual income; shortfalls are banked and made up in high-income future years.

Source: IRC 664 (Cornell LII); cited as §664(d)(3)

FLIP-CRUT Trigger

Why it matters: Allows an income-only CRT to flip to a standard CRUT upon a specific trigger (like the sale of an illiquid business).

Source: Treas. Reg. 1.664-3; cited as Reg. §1.664-3

Four-Tier Ordering (WIFO)

Why it matters: CRT distributions are taxed Worst-In-First-Out: ordinary income first, capital gains second, tax-deferred third, corpus last.

Source: IRC 664 (Cornell LII); cited as §664(b)

30% Control Requirement

Why it matters: The ESOP must own at least 30% of the corporation's stock post-sale for the seller to qualify for gain deferral.

Source: IRC 1042 (Cornell LII); cited as §1042(b)(2)

C Corp Requirement

Why it matters: Only C Corporation stock qualifies; S Corporations are ineligible for 1042 deferral unless converted prior.

Source: IRC 1042 (Cornell LII); cited as §1042(c)(1)

Qualified Replacement (QRP)

Why it matters: Proceeds must be reinvested in domestic operating corporation securities (ETFs, mutual funds, and passive cos fail).

Source: IRC 1042 (Cornell LII); cited as §1042(c)(4)

Reinvestment Window

Why it matters: The seller only has 3 months before and 12 months after the sale to purchase QRP to complete the deferral.

Source: IRC 1042 (Cornell LII); cited as §1042(a)(2)

Premature QRP Disposition

Why it matters: Selling or gifting QRP (other than via death, reorganization, or another §1042 exchange) triggers the deferred tax.

Source: IRC 1042 (Cornell LII); cited as §1042(e)

Family Attribution Rules

Why it matters: The seller, their family members, and 25% shareholders are permanently prohibited from receiving ESOP allocations.

Source: IRC 409 (Cornell LII); cited as §409(n)

Eligible Entity Restrictions

Why it matters: Strictly excludes service businesses (health, law, consulting), finance, farming, mining, and hospitality.

Source: IRC 1202 (Cornell LII); cited as §1202(e)(3)

Active Business Requirement

Why it matters: 80% of assets must be actively used in a qualified trade or business for substantially the entire holding period.

Source: IRC 1202 (Cornell LII); cited as §1202(e)(1)

Original Issue Requirement

Why it matters: Stock must be acquired directly from the C-Corp for money, property, or services (secondary market purchases fail).

Source: IRC 1202 (Cornell LII); cited as §1202(c)(1)

Anti-Churning Redemptions

Why it matters: Significant redemptions of stock by the corporation within 1-2 years of issuance disqualify the QSBS status.

Source: IRC 1202 (Cornell LII); cited as §1202(c)(3)

§1045 Rollover Window

Why it matters: Allows rolling QSBS gain into new QSBS stock completely tax-deferred if completed within 60 days of the sale.

Source: IRC 1045 (Cornell LII); cited as §1045(a)

Partnership Pass-Through

Why it matters: QSBS benefits flow through to K-1 partners only if they held their partnership interest when the QSBS was originally acquired.

Source: IRC 1202 (Cornell LII); cited as §1202(g)

OP Unit Exchange

Why it matters: Exchanging real estate for Operating Partnership (OP) units is tax-deferred; converting them to REIT shares triggers tax.

Source: IRC 721 (Cornell LII); cited as §721(a)

§704(c) Allocation Method

Why it matters: Choice of Traditional, Curative, or Remedial method dictates how built-in gains are amortized back to the contributor.

Source: Treas. Reg. 1.704-3; cited as Reg. §1.704-3

Debt Allocation Shift

Why it matters: If the REIT's debt doesn't effectively replace the seller's prior nonrecourse debt, the seller faces immediate debt-relief boot.

Source: IRC 752 (Cornell LII); cited as §752

Bottom-dollar payment obligations

Why it matters: IRS heavily scrutinizes minimal-risk assurance used to artificially maintain debt allocation for the original seller.

Source: Treas. Reg. 1.752-2; cited as Reg. §1.752-2(b)

§1255 Cost-Share Recapture

Why it matters: Taxes government cost-sharing conservation payments as ordinary income if property is sold within 20 years.

Source: IRC 1255 (Cornell LII); cited as §1255

Conservation Easement

Why it matters: Generates immense charitable deductions while restricting future land development, lowering overall asset value.

Source: IRC 170 (Cornell LII); cited as §170(h)

Raised Livestock Basis

Why it matters: Raised breeding livestock typically have a zero tax basis, meaning 100% of the sale price is pure gain.

Source: IRC 1011 (Cornell LII); cited as §1011

CCC Loan / Crop Inventory

Why it matters: Crops held in inventory or under Commodity Credit Corp loans trigger ordinary income, completely missing capital gains rates.

Source: IRC 77 (Cornell LII); cited as §77

§180 Fertilizer Expenses

Why it matters: Past deductions for fertilizer/soil conditioning alter land basis and may trigger ordinary recapture on an asset sale.

Source: IRC 180 (Cornell LII); cited as §180

Ag Land 1031 to Water Rights

Why it matters: Perpetual water rights can be exchanged for farmland tax-deferred, but only if state law defines water rights as real property.

Source: IRC 1031 (Cornell LII); cited as §1031 / State Property Law

Unharvested Crops

Why it matters: If sold with the land at the same time to the same buyer, unharvested crops uniquely get favorable capital gains treatment.

Source: IRC 1231 (Cornell LII); cited as §1231(b)(4)

Single Purpose Ag Structures

Why it matters: Greenhouses and hog houses depreciate quickly but trigger harsh 100% ordinary income recapture upon sale.

Source: IRC 1245 (Cornell LII); cited as §1245

Escrows and Holdbacks

Why it matters: Treated as an installment sale; funds are generally not taxed until released from the escrow agent to the seller.

Source: IRC 453 (Cornell LII); cited as §453

Consulting Agreements

Why it matters: Recharacterizes sale proceeds as post-close wages, triggering ordinary income and heavy FICA/payroll taxes.

Source: IRC 61 (Cornell LII); cited as §61 / §162

Noncompete Covenants

Why it matters: Payments specifically allocated to noncompetes are always taxed as ordinary income to the seller, never capital gains.

Source: IRC 197 (Cornell LII); cited as §197

Rollover Equity (tax-deferred)

Why it matters: Rolling seller equity directly into the buyer's new capital structure defers taxation on that portion of the deal.

Source: IRC 721 (Cornell LII); cited as §721 or §351

Retention Bonuses

Why it matters: Paid to key seller-employees post-close; taxed as heavy ordinary W-2 income and entirely separate from capital sale proceeds.

Source: IRC 61 (Cornell LII); cited as §61

Working Capital Adjustments

Why it matters: True-ups 90 days post-close adjust the final recognized purchase price, potentially requiring amended return filings.

Source: IRC 1001 (Cornell LII); cited as §1001

R&W Insurance Costs

Why it matters: Typically capitalized into the transaction costs, reducing overall capital gain rather than providing a current ordinary deduction.

Source: IRC 263 (Cornell LII); cited as §263(a)

M&A Advisory & Legal Fees

Why it matters: Banking and legal fees must typically be capitalized against the proceeds (reducing capital gain), not deducted from ordinary income.

Source: IRC 263 (Cornell LII); cited as INDOPCO / §263(a)

Target Cash Trapped

Why it matters: Pre-close dividends to extract excess cash from a C-Corp might be taxed as ordinary dividends rather than capital gains.

Source: IRC 301 (Cornell LII); cited as §301

Golden Parachutes

Why it matters: Massive transaction bonuses triggered by a change of control face a 20% excise tax penalty for the seller.

Source: IRC 280G (Cornell LII); cited as §280G / §4999

Phantom Stock Payouts

Why it matters: Cash payouts to employees holding phantom stock reduce the seller's enterprise value and are ordinary income to employees.

Source: IRC 409A (Cornell LII); cited as §409A

Unvested Option Acceleration

Why it matters: Accelerating options at close creates massive, immediate ordinary income tax events for the selling executives.

Source: IRC 83 (Cornell LII); cited as §83

Earnout FICA Recharacterization

Why it matters: If the IRS dictates an earnout was actually compensation for post-close services, it gets hit with full payroll/Medicare taxes.

Source: IRC 3121 (Cornell LII); cited as §3121

§751 Hot Assets Recapture

Why it matters: In a partnership sale, receivables and inventory heavily convert otherwise capital gain into ordinary income.

Source: IRC 751 (Cornell LII); cited as §751

ACA Subsidy Cliff

Why it matters: Sale income eliminates Premium Tax Credits, making marketplace health insurance dramatically more expensive.

Source: IRC 36B (Cornell LII); cited as §36B

Required Minimum Distributions

Why it matters: RMDs stack on top of sale income, pushing marginal ordinary brackets higher before capital gains are even stacked.

Source: IRC 401 (Cornell LII); cited as §401(a)(9)

Roth Conversion Squeeze

Why it matters: A massive sale year eliminates low-bracket "room" for strategic Roth conversions.

Source: IRC 408A (Cornell LII); cited as §408A

LTCG Bracket Thresholds

Why it matters: Dictates exactly when capital gains cross from 0% to 15% to the maximum 20% federal rate.

Source: IRC 1 (Cornell LII); cited as §1(h)

Gross Estate Inclusion

Why it matters: The entire remaining principal of an installment note or deferred trust is pulled into the taxable gross estate.

Source: IRC 2033 (Cornell LII); cited as §2033

Spousal Portability (DSUE)

Why it matters: Allows a surviving spouse to use the deceased spouse's unused estate exemption, doubling shelter capacity.

Source: IRC 2010 (Cornell LII); cited as §2010(c)(5)

Legal & Accounting Prep

Why it matters: Specialized transaction attorneys and CPA modeling easily cost tens of thousands, reducing net-net proceeds.

Source: IRC 162 (Cornell LII); cited as §162 / §263

Unamortized Loan Costs

Why it matters: Paying off a commercial mortgage at closing allows the immediate deduction of any remaining capitalized loan origination fees.

Source: IRC 163 (Cornell LII); cited as §163

Prepayment Penalties / Defeasance

Why it matters: Yield maintenance or defeasance costs to retire debt early at closing heavily reduce net cash flow and are generally deductible.

Source: IRC 162 (Cornell LII); cited as §162 / §163

Selling Price

Why it matters: The gross consideration (cash, notes, property, debt assumed) before reductions for selling expenses or mortgage payoff.

Source: IRC 15 (Cornell LII); cited as Reg. §15a.453-1(b)(2)(ii)

Year-1 Down Payment Volume

Why it matters: Cash, buyer property, and earnest money received in year of sale accelerate immediate gain recognition at the GPR.

Source: IRC 453 (Cornell LII); cited as §453(b) / §453(c)

Qualifying Indebtedness

Why it matters: Existing secured debt assumed by buyer; non-qualifying debt (e.g., debt incurred in contemplation of sale) is treated as cash.

Source: IRC 15 (Cornell LII); cited as Reg. §15a.453-1(b)(2)(iv)

Liabilities in Excess of Basis

Why it matters: Debt assumed exceeding adjusted basis is deemed a taxable cash payment received in the year of sale, driving GPR to 100%.

Source: IRC 15 (Cornell LII); cited as Reg. §15a.453-1(b)(3)(i)

Election Out of §453

Why it matters: Irrevocable election on Form 4797/Schedule D to recognize entire gain in year 1, useful if seller has large expiring NOLs.

Source: IRC 453 (Cornell LII); cited as §453(d)

§453(i) Full Recapture Recognition

Why it matters: All §1245 and §1250 recapture is taxed as ordinary income in Year 1, even if $0 principal is collected at closing.

Source: IRC 453 (Cornell LII); cited as §453(i)(1)

Basis Add-Back for Recapture

Why it matters: Recapture taxed upfront is added back to basis before computing gross profit, lowering the ongoing GPR for subsequent payments.

Source: IRC 453 (Cornell LII); cited as §453(i)(2)

Stated Maximum Selling Price

Why it matters: Assumes all earnout milestones are hit to calculate GPR; downward adjustments in later years trigger capital loss deductions.

Source: IRC 15 (Cornell LII); cited as Reg. §15a.453-1(c)(2)

Fixed Term / No Stated Max Price

Why it matters: Basis is allocated equally across the fixed payment years; unrecovered basis in an underperforming year carries forward.

Source: IRC 15 (Cornell LII); cited as Reg. §15a.453-1(c)(3)

No Stated Price and No Fixed Term

Why it matters: Basis recovers ratably over an arbitrary 15-year statutory period regardless of actual deal cash flow realities.

Source: IRC 15 (Cornell LII); cited as Reg. §15a.453-1(c)(4)

Alternative Basis Recovery Method

Why it matters: Requires an advance IRS private letter ruling to recover basis faster if standard ratable rules substantially distort income.

Source: IRC 15 (Cornell LII); cited as Reg. §15a.453-1(c)(7)

Third-Party Personal assurance

Why it matters: A parent company or principal's personal assurance secures the note without constituting payment under §453.

Source: IRC 15 (Cornell LII); cited as Reg. §15a.453-1(b)(3)(i)

Depreciable Property to Related Person

Why it matters: Prohibits installment reporting on depreciable asset sales to controlled entities, forcing entire gain to be recognized immediately.

Source: IRC 453 (Cornell LII); cited as §453(g)(1)

§453(g) Ordinary Income Recharacterization

Why it matters: Converts capital gain into ordinary income when selling depreciable property to an entity owned >50% by seller or family.

Source: IRC 1239 (Cornell LII); cited as §1239(a)

Dealer Disposition Prohibition

Why it matters: Prohibits installment reporting on inventory, dealer property, or real estate lots held for sale to customers in ordinary course.

Source: IRC 453 (Cornell LII); cited as §453(b)(2)(A) / §453(l)

Publicly Traded Property Exclusion

Why it matters: Prohibits installment treatment for sales of stock or securities traded on an established securities exchange.

Source: IRC 453 (Cornell LII); cited as §453(k)(2)

Revolving Credit Plan Disallowance

Why it matters: Sales of personal property under a revolving credit plan cannot be reported on the installment method.

Source: IRC 453 (Cornell LII); cited as §453(k)(1)

Selling Expenses Capitalization

Why it matters: Legal, title, and brokerage fees add directly to basis rather than reducing selling price, directly shaping the contract price.

Source: IRC 15 (Cornell LII); cited as Reg. §15a.453-1(b)(2)(v)

Earnout Recharacterization via Imputed Interest

Why it matters: Future contingent earnout payments must be discounted back to closing; the discount portion is taxed as ordinary interest, not capital gain.

Source: Treas. Reg. 1.1275-4; cited as Reg. §1.1275-4(c)

Prior Capitalized Interest Basis Inclusion

Why it matters: Construction or development interest previously added to real estate basis reduces overall gross profit prior to GPR application.

Source: IRC 263A (Cornell LII); cited as §263A / §1016

$150,000 Sales Price Threshold

Why it matters: The §453A rules completely exempt installment obligations arising from transactions where the sales price does not exceed $150,000.

Source: IRC 453A (Cornell LII); cited as §453A(b)(1)

$5M Face Value Exemption Ceiling

Why it matters: Taxpayers only owe interest on the portion of deferred taxes associated with installment notes whose cumulative face value exceeds $5M at year-end.

Source: IRC 453A (Cornell LII); cited as §453A(b)(2)(B)

Applicable Percentage Fraction

Why it matters: Multiplies the deferred tax by (Aggregate Note Balance − $5,000,000) / Aggregate Note Balance, locking in the taxable ratio for the life of the note.

Source: IRC 453A (Cornell LII); cited as §453A(c)(4)

Underpayment Rate Multiplier

Why it matters: Multiplies deferred tax liability by the floating federal underpayment interest rate (AFR + 3%), creating an ongoing nondeductible annual cash fee.

Source: IRC 453A (Cornell LII); cited as §453A(c)(2)(B) / §6621(a)(2)

Direct Debt Collateralization

Why it matters: Pledging an installment note as collateral for any loan treats the net loan proceeds as immediate payment received on the installment note.

Source: IRC 453A (Cornell LII); cited as §453A(d)(1)

Secondary Market Note Sale / Discount

Why it matters: Selling an installment note at a discount triggers gain or loss measured by the difference between the basis of the note and the cash realized.

Source: IRC 453B (Cornell LII); cited as §453B(a)(1)

Inter Vivos Gift of Note

Why it matters: Gifting an installment note to family members accelerates all unrecognized deferred gain immediately to the donor based on fair market value.

Source: IRC 453B (Cornell LII); cited as §453B(a)(2)

Debt Cancellation / Forgiveness

Why it matters: Forgiving principal payments or canceling the seller note treats the note as satisfied for full face value, triggering immediate gain to the seller.

Source: IRC 453B (Cornell LII); cited as §453B(f)(1)

Divorce Transfer Exception

Why it matters: Transferring an installment note to a spouse incident to divorce does not trigger gain; the recipient spouse steps into the original installment method.

Source: IRC 453B (Cornell LII); cited as §453B(g) / §1041

Transfer at Death (IRD Mechanics)

Why it matters: Transmission of a note at death is not a §453B disposition; instead, deferred gain becomes Income in Respect of a Decedent (IRD) with no basis step-up.

Source: IRC 453B (Cornell LII); cited as §453B(c) / §691(a)(4)

Note Bequest to Buyer/Obligor

Why it matters: Bequeathing an installment note back to the buyer automatically cancels the debt, forcing the decedent's estate to report all deferred gain immediately.

Source: IRC 691 (Cornell LII); cited as §691(a)(5)

Mandatory Nonrecognition Scope

Why it matters: Reacquiring real property in satisfaction of seller debt bars recognizing capital losses and prevents bad debt write-offs entirely.

Source: IRC 1038 (Cornell LII); cited as §1038(a)

Repossession Gain Limitation

Why it matters: Taxable gain on real estate repossession is strictly capped at previously untaxed cash received minus repossession costs incurred.

Source: IRC 1038 (Cornell LII); cited as §1038(b)(2)

Substituted Basis Formula

Why it matters: Basis in reacquired property equals seller's basis in the canceled note, plus repossession gain recognized, plus out-of-pocket repossession costs.

Source: IRC 1038 (Cornell LII); cited as §1038(c)

Holding Period Tacking

Why it matters: The seller's post-repossession holding period includes the pre-sale holding period, preserving long-term status for future liquidations.

Source: Treas. Reg. 1.1038-1; cited as Reg. §1.1038-1(g)(3)

§1274 Adequate Stated Interest

Why it matters: If stated interest is below the Applicable Federal Rate (AFR), the IRS recomputes the purchase price and imputes Original Issue Discount (OID).

Source: IRC 1274 (Cornell LII); cited as §1274(c)(2)

§483 Unstated Interest Safe Harbor

Why it matters: Applies to smaller sales exempt from §1274 (e.g., farm sales under $1M or total sales under $250,000), converting deficient principal to interest.

Source: Treas. Reg. 1.483-1; cited as §483 / Reg. §1.483-1

3-Month AFR Selection Rule

Why it matters: In binding sale contracts, parties can select the lowest AFR in effect across the month the contract is signed or either of the two preceding months.

Source: IRC 1274 (Cornell LII); cited as §1274(d)(2)

AFR Term Maturity Tiers

Why it matters: Notes must meet distinct benchmark rates depending on term: Short-Term (up to 3 years), Mid-Term (3 to 9 years), or Long-Term (exceeding 9 years).

Source: IRC 1274 (Cornell LII); cited as §1274(d)(1)

Below-Market Shareholder/Employee Loans

Why it matters: Structuring seller financing through affiliated parties at below-market rates creates phantom imputed compensation or deemed dividends.

Source: IRC 7872 (Cornell LII); cited as §7872(c)

Ordinary Rate vs LTCG Rate Arbitrage

Why it matters: Interest collected is taxed as ordinary income (up to 37%), whereas deferred principal is taxed at long-term capital gains rates (up to 20%).

Source: IRC 1 (Cornell LII); cited as §1(a) vs §1(h)

NIIT Surtax on Note Interest

Why it matters: Stated interest on seller notes is automatically subject to the 3.8% Net Investment Income Tax, regardless of material participation in the underlying asset.

Source: IRC 1411 (Cornell LII); cited as §1411(c)(1)(A)(i)

Community Property Status

Why it matters: Grants a 100% basis step-up across the entire property upon the death of the first spouse, eliminating capital gains for the survivor.

Source: IRC 1014 (Cornell LII); cited as §1014(b)(6)

Divorce Incident to Sale

Why it matters: Inter-spousal property transfers during divorce carry over basis tax-deferred; structuring before vs. after sale shifts the tax burden.

Source: IRC 1041 (Cornell LII); cited as §1041

Number of Eligible Dependents

Why it matters: Dictates eligibility for child and dependent tax credits, which phase out rapidly across the big-sale income spike.

Source: IRC 24 (Cornell LII); cited as §24 / §152

Annual Exclusion Gifting Program

Why it matters: Gifting pre-sale minority interests to heirs removes future post-sale appreciation and utilizes the annual gift exclusion ($19,000/donee).

Source: IRC 2503 (Cornell LII); cited as §2503(b)

Grantor vs Non-Grantor Trust

Why it matters: Grantor trusts pass the sale tax burden directly to the grantor's 1040, while non-grantor trusts trap and pay tax at compressed brackets.

Source: IRC 671 (Cornell LII); cited as §671 to §679

Fiduciary Income Tax Compression

Why it matters: Non-grantor trusts hit the maximum 37% ordinary and 20% capital gains brackets at under $16,000 of income, penalizing retained proceeds.

Source: IRC 1 (Cornell LII); cited as §1(e)

SALT Cap $40,000 Phase-Down

Why it matters: Increases the SALT cap to $40,000 but phases it down above $500,000 MAGI, eliminating state tax deductions for big-sale sellers.

Source: IRC 164 (Cornell LII); cited as OBBBA 2025 / §164(b)(6)

§1062 Farm Sale Installment Tax

Why it matters: Allows qualifying farmers selling land to beginning/socially disadvantaged farmers to pay resulting tax in 4 equal interest-free annual installments.

Source: IRC 1062 (Cornell LII); cited as OBBBA 2025 / IRC §1062

35% Top Bracket Itemized Cap

Why it matters: Caps the tax benefit of itemized deductions (including charitable gifts to CRTs or DAFs) at 35% even for sellers taxed at the 37% marginal rate.

Source: IRC 68 (Cornell LII); cited as OBBBA 2025 / §68

Permanent $15M Estate Exemption

Why it matters: Establishes a permanent $15M baseline exemption per individual ($30M married) indexed for inflation, replacing the TCJA sunset cliff.

Source: IRC 2010 (Cornell LII); cited as OBBBA 2025 / §2010(c)

Alabama top income tax rate

Alabama taxes capital gain at its regular graduated rates, topping out at 5%.

Why it matters: Nearly all of a large gain lands in the 5% bracket, so the Alabama cost scales with the gain reported each year.

Source: Tax Foundation, State Income Tax Rates 2026

Alabama capital gain treatment and federal tax deduction

Alabama has no capital gain rate or exclusion, but it lets residents deduct federal income tax paid, including net investment income tax.

Why it matters: A big federal bill in the sale year becomes an Alabama deduction, which lowers the effective Alabama rate on the gain.

Source: Alabama 2025 Form 40 instructions (Federal Income Tax Deduction Worksheet)

Alabama installment method and 453(i)

Alabama follows the federal installment method except IRC 453(i), the federal rule that taxes depreciation recapture in the year of sale.

Why it matters: Recapture timing on the Alabama return can differ from the federal return on an installment or structured sale.

Source: Alabama 2025 Form 40 instructions

Alabama capital loss rule (no carryforward)

Alabama deducts the entire capital loss in the year it occurs, with no $3,000 cap and no carryforward.

Why it matters: Losses must be harvested in the same Alabama tax year as the gain they offset; a federal carryforward is worth nothing on the Alabama return.

Source: Alabama 2025 Form 40 instructions

Arizona flat income tax rate

Arizona taxes all income, including capital gain, at one flat rate.

Why it matters: A low flat rate keeps the Arizona share of a big sale small and the same in every payment year.

Source: Tax Foundation, State Income Tax Rates 2026

Arizona 25% long-term capital gain subtraction

Arizona subtracts 25% of net long-term capital gain from assets acquired after December 31, 2011.

Why it matters: Only 75% of qualifying long-term gain is taxed, so the effective Arizona rate on that gain is about 1.875%.

Source: A.R.S. 43-1022

Arizona IRC conformity date

Arizona adopts the Internal Revenue Code as in effect on a fixed date that it updates each year.

Why it matters: The date decides whether One Big Beautiful Bill Act changes flow into the Arizona return.

Source: A.R.S. 43-105

Arizona Opportunity Zone conformity

Arizona follows the federal Opportunity Zone deferral and exclusion because it adopts the current IRC with no Opportunity Zone add-back.

Why it matters: Gain rolled into a Qualified Opportunity Fund is deferred for Arizona too, and the 10-year exclusion carries over.

Source: A.R.S. 43-105 (no Opportunity Zone modification in 43-1021 or 43-1022)

Arizona bonus depreciation treatment

For property placed in service after 2016, Arizona computes depreciation as if the full federal bonus were allowed, but it adds back the new 168(n) production-property deduction from 2026.

Why it matters: Matching depreciation means matching basis, so Arizona gain and recapture on a sale usually equal the federal figures for post-2016 assets.

Source: A.R.S. 43-1021(11), (17); 43-1022

Arkansas top income tax rate

Arkansas cut its top individual rate to 3.7% for 2026, retroactive to January 1, 2026.

Why it matters: The top rate applies to almost all of a large gain, before the capital gain exclusion below.

Source: Arkansas DFA fiscal impact statement, SB1 (2026 special session)

Arkansas capital gain exclusion and $10 million cap

Arkansas taxes only 50% of net long-term capital gain, and net capital gain above $10,000,000 is fully exempt.

Why it matters: On a large sale the effective Arkansas rate on long-term gain is about half the top rate, and gain above $10 million in a year is untaxed.

Source: Arkansas 2025 Form AR1000D instructions

California top income tax rate

California's top bracket is 12.3%, plus a 1% Mental Health Services Tax on taxable income over $1,000,000.

Why it matters: A large gain is taxed almost entirely at 13.3%, the highest state rate in the country.

Source: FTB 2025 Form 540 tax rate schedules; R&TC 17043

California capital gain treatment

California has no lower rate for capital gains; all capital gain is taxed as ordinary income.

Why it matters: Spreading gain across years is the main way to keep it out of the 12.3% and 13.3% brackets.

Source: FTB, Capital gains and losses

California installment sales after a move

California taxes installment gain from California real property whenever it is received, even after the seller moves away.

Why it matters: Moving out of California does not stop California tax on payments from a California property sale.

Source: FTB Pub. 1100, Taxation of Nonresidents and Individuals Who Change Residency

California 1031 clawback reporting (FTB 3840)

When California property is exchanged for property outside California, the seller files FTB 3840 every year until the deferred California gain is recognized.

Why it matters: California keeps the right to tax the deferred gain when the out-of-state replacement property is later sold.

Source: FTB 2025 Form 3840 instructions

California Opportunity Zone nonconformity

California does not conform to the federal Opportunity Zone deferral, basis step-up or 10-year exclusion.

Why it matters: Gain rolled into a Qualified Opportunity Fund is fully taxed by California in the year of sale, and fund appreciation is taxed on exit.

Source: FTB Pub. 1001 (2025)

California real estate withholding (Form 593)

Buyers withhold California tax on most real property sales unless the seller certifies an exemption.

Why it matters: Withholding pulls cash out at closing; on an installment sale it also applies to the principal in later payments.

Source: FTB 2025 Form 593 instructions

California nonresident capital loss limit

For nonresidents, California computes capital loss carryovers and limits using California-source items only.

Why it matters: Portfolio losses of a seller who has moved away do not offset gain from California property.

Source: FTB 2025 Schedule D (540NR) instructions

California real estate professional rule

California does not adopt the federal real estate professional exception, so rental losses stay passive on the California return.

Why it matters: Suspended California passive losses can be larger than federal ones, and they are released when the property is sold.

Source: R&TC 17561

California bonus depreciation and Section 179 limits

California does not allow federal bonus depreciation and caps Section 179 expensing at $25,000.

Why it matters: California basis is usually higher than federal basis, so California gain and recapture on a sale are usually smaller.

Source: R&TC 17255; FTB Pub. 1001 (2025)

California documentary transfer tax

Counties charge a documentary transfer tax, and cities in that county may add half that rate or their own higher rate.

Why it matters: It is a closing cost on the price, often paid by the seller in California, so it reduces net proceeds.

Source: R&TC 11911

Los Angeles city transfer tax (Measure ULA)

The City of Los Angeles adds a large tax on the whole price of sales above set thresholds.

Why it matters: Above the threshold the rate jumps from 0.45% to 4.45% or 5.95% of the full price, which can change the timing or structure of a sale.

Source: City of Los Angeles Office of Finance, Measure ULA FAQ

California IRC conformity date

California adopts the Internal Revenue Code as of a fixed date and lists its own exceptions section by section.

Why it matters: One Big Beautiful Bill Act changes do not apply in California unless the Legislature adopts them.

Source: R&TC 17024.5

Colorado flat income tax rate

Colorado taxes all income, including capital gain, at one flat rate.

Why it matters: The Colorado share of a sale is the flat rate times the gain reported each year.

Source: Colorado 2025 DR 0104 booklet

Colorado capital gain subtraction (farmers only)

Since 2022, Colorado's capital gain subtraction is limited to farmers who file Schedule F and sell Colorado agricultural land.

Why it matters: Most sellers get no Colorado break on gain, while a qualifying farm seller can subtract up to $100,000.

Source: Colorado DOR, Income Tax Topics: Colorado Capital Gain Subtraction

Colorado Social Security subtraction and the AGI test

Colorado taxes Social Security only for some sellers under 65, and a big sale year can trigger that limit.

Why it matters: A seller aged 55 to 64 whose federal AGI spikes above the threshold loses the full subtraction and is capped at $20,000.

Source: Colorado 2025 DR 0104 booklet (Subtractions, line 3)

Colorado nonresident real property withholding

Buyers withhold Colorado tax when a nonresident sells Colorado real property for more than $100,000.

Why it matters: Withholding takes cash at closing and is credited against the seller's Colorado return.

Source: Colorado DR 1083 instructions

Connecticut top income tax rate

Connecticut taxes capital gain as ordinary income at graduated rates up to 6.99%.

Why it matters: Benefit recapture makes high earners pay the top rate on all of their income, not just the slice above the threshold.

Source: C.G.S. 12-700; Tax Foundation, State Income Tax Rates 2026

Connecticut accrual when moving out mid-note

A Connecticut resident who becomes a nonresident must accrue income and gain that accrued before the move, regardless of accounting method, unless a bond or other security is filed.

Why it matters: Moving away during an installment note can pull the remaining gain into the last Connecticut resident year.

Source: C.G.S. 12-717(c)

Connecticut Social Security taxation and the AGI test

Connecticut exempts Social Security fully below an AGI threshold and taxes up to 25% of benefits above it.

Why it matters: A sale year that pushes federal AGI over the threshold makes part of Social Security taxable in Connecticut that year.

Source: C.G.S. 12-701(a)(20)(B)

Connecticut estate and gift tax

Connecticut taxes estates and lifetime gifts above the federal basic exclusion amount at a flat 12%.

Why it matters: Heirs of a large estate, including a remaining installment note, can owe Connecticut tax even when no federal tax is due on the same base.

Source: C.G.S. 12-391(g)

Connecticut real estate conveyance tax

Connecticut charges a state conveyance tax on the seller, tiered for residential property, plus a municipal conveyance tax.

Why it matters: On a high-value home the 2.25% top tier is a large closing cost that reduces net proceeds.

Source: C.G.S. 12-494

Delaware top income tax rate

Delaware taxes capital gain as ordinary income at graduated rates up to 6.6%.

Why it matters: Almost all of a large gain is taxed at 6.6%.

Source: 30 Del. C. 1102

Delaware estimated tax at recording (Form 5403)

A nonresident seller of Delaware real property pays estimated Delaware tax on the gain when the deed is recorded.

Why it matters: The payment comes out of closing proceeds unless the seller reports the gain on the installment method.

Source: Delaware Form 5403

Delaware realty transfer tax

Delaware charges a 4% realty transfer tax, split equally between buyer and seller unless the contract says otherwise.

Why it matters: The seller's 2% half is one of the highest seller closing costs in the country.

Source: Delaware Form RTT-TAX instructions

Delaware retirement income exclusion (includes capital gains)

Residents 60 or older can exclude up to $12,500 of eligible retirement income, which includes capital gains.

Why it matters: A small part of each year's installment gain can be excluded for each qualifying spouse.

Source: 30 Del. C. 1106(b)

District of Columbia top income tax rate

D.C. taxes capital gain as ordinary income at graduated rates up to 10.75%.

Why it matters: Gain that pushes taxable income over $1 million is taxed at 10.75%.

Source: DC OTR, Individual and Fiduciary Income Tax Rates

D.C. bonus depreciation decoupling

D.C. disallows federal bonus depreciation and the new production-property deduction and limits Section 179.

Why it matters: D.C. basis is higher than federal basis, so D.C. gain on a sale is figured without the bonus depreciation.

Source: DC 2025 Schedule I instructions

D.C. Opportunity Zone deferral add-back

D.C. adds back capital gain deferred federally by investing in a Qualified Opportunity Fund.

Why it matters: D.C. taxes the gain in the year of sale even when it is deferred federally.

Source: DC 2025 Schedule I instructions

D.C. estate tax

D.C. taxes estates above a much lower exclusion than the federal one.

Why it matters: An estate holding a sale's proceeds or an installment note can owe D.C. tax with no federal estate tax due.

Source: DC OTR, Notice of Oct. 1, 2025 Tax Changes

D.C. deed transfer tax

D.C. charges a deed transfer tax on the price, customarily the seller's side, in addition to the recordation tax.

Why it matters: It is a closing cost that reduces the seller's net proceeds.

Source: DC CFO, Tax Rates and Revenues, Property Taxes

Florida documentary stamp tax on deeds

Florida taxes deeds at a set rate per $100 of price; Miami-Dade has its own rate and a surtax.

Why it matters: With no Florida income tax, the deed stamp is often the main state cost of selling Florida property.

Source: Florida DOR, Documentary Stamp Tax

Georgia flat income tax rate

Georgia taxes all income, including capital gain, at one flat rate.

Why it matters: The Georgia share of a sale is the flat rate times the gain reported each year.

Source: Georgia DOR, Important Updates (2026 Income Tax Changes)

Georgia retirement income exclusion (includes capital gains)

Georgia residents 62 or older can exclude retirement income, which includes capital gains, interest and rental income.

Why it matters: A couple 65+ can shelter up to $130,000 of gain a year, which favors spreading gain over several years.

Source: Georgia DOR, Retirement Income Exclusion

Georgia nonresident real property withholding (G2-RP)

Buyers withhold Georgia tax when a nonresident sells Georgia real property, including on later installment payments.

Why it matters: Withholding is taken at closing and on each installment payment, so it affects cash flow for the whole note.

Source: Georgia Form G2-RP instructions

Georgia real estate transfer tax

Georgia charges a transfer tax on the sale price that the seller owes unless the contract shifts it.

Why it matters: It is a small closing cost that reduces net proceeds.

Source: Georgia DOR, Real Estate Transfer Tax

Georgia IRC conformity date

Georgia adopts the Internal Revenue Code as of a fixed date that its legislature updates each year.

Why it matters: Whether One Big Beautiful Bill Act changes apply in Georgia depends on that year's update.

Source: Georgia 2025 IT-511 booklet

Georgia bonus depreciation decoupling

Georgia disallows federal bonus depreciation, so Georgia depreciation and basis differ from federal.

Why it matters: Georgia basis is usually higher, so Georgia gain and recapture on a sale are usually smaller than federal.

Source: Georgia 2025 IT-511 booklet

Hawaii capital gain rate cap

Hawaii caps the tax on net capital gain at 7.25%, while ordinary income runs up to 11%.

Why it matters: Long-term gain gets the 7.25% cap, but depreciation recapture taxed as ordinary income and note interest can reach 11%.

Source: HRS 235-51(f); Tax Foundation, State Income Tax Rates 2026

Hawaii real property withholding (HARPTA)

Buyers withhold Hawaii tax when a nonresident sells Hawaii real property.

Why it matters: HARPTA takes 7.25% of the whole amount realized, not the gain, so it can exceed the actual tax and tie up cash until the return is filed.

Source: Hawaii Tax Facts 2010-1, Understanding HARPTA (rev. April 2025)

Hawaii conveyance tax

Hawaii charges a tiered conveyance tax that the seller pays, with higher tiers when the buyer will not live in the home.

Why it matters: On a high-value property the rate climbs to 1% or 1.25% of the price.

Source: HRS 247-2, 247-4

Hawaii estate tax

Hawaii taxes estates above the 2017 federal exclusion amount at rates up to 20%.

Why it matters: Estates far below the federal exclusion can still owe Hawaii estate tax.

Source: HRS 236E-6, 236E-8

Hawaii bonus depreciation decoupling

Hawaii does not allow federal bonus depreciation.

Why it matters: Hawaii basis is higher than federal basis, so Hawaii gain and recapture on a sale differ from federal.

Source: HRS 235-2.4(m)

Hawaii IRC conformity date

Hawaii adopts the Internal Revenue Code as of a fixed date, with listed exceptions.

Why it matters: Federal changes after that date, including the One Big Beautiful Bill Act, apply in Hawaii only if adopted later.

Source: HRS 235-2.3

Hawaii Opportunity Zone conformity

Hawaii follows the original federal Opportunity Zone rules because 1400Z-1 and 1400Z-2 are not on its list of inoperative sections.

Why it matters: Gain rolled into a Qualified Opportunity Fund is deferred for Hawaii too.

Source: HRS 235-2.3

Idaho flat income tax rate

Idaho taxes income above a small indexed threshold at one flat rate.

Why it matters: The Idaho share of a sale is roughly the flat rate times the gain, before the capital gain deduction.

Source: Idaho Code 63-3024; Tax Foundation, State Income Tax Rates 2026

Idaho 60% capital gain deduction (Idaho property)

Idaho deducts 60% of capital gain net income from qualified property with Idaho situs, such as Idaho real property held at least 12 months.

Why it matters: Only 40% of qualifying Idaho gain is taxed, while gain on out-of-state property or stocks gets no deduction.

Source: Idaho Code 63-3022H

Idaho IRC conformity date

Idaho adopts the Internal Revenue Code as in effect on January 1 of the current year, with listed exceptions.

Why it matters: Because the 2026 date follows the One Big Beautiful Bill Act, most of its changes apply in Idaho.

Source: Idaho Code 63-3004

Illinois flat income tax rate

Illinois taxes all net income, including capital gain, at one flat rate.

Why it matters: The Illinois share of a sale is the flat rate times the gain reported each year.

Source: 35 ILCS 5/201(b)(5.4)

Illinois special depreciation add-back

Illinois reverses federal bonus depreciation, and from 2026 the 168(n) production-property deduction, with later subtractions.

Why it matters: When the property is sold, the add-backs and subtractions are trued up, which changes the Illinois gain.

Source: Illinois 2025 Form IL-4562 instructions

Illinois estate tax

Illinois taxes estates above $4,000,000, an amount that is not indexed.

Why it matters: An estate holding sale proceeds or an installment note can owe Illinois tax with no federal estate tax due.

Source: 35 ILCS 405/2(b)

Illinois real estate transfer tax

Illinois charges a state transfer tax on deeds, and counties and some home-rule cities add their own.

Why it matters: It is a closing cost, typically paid by the seller, that reduces net proceeds.

Source: 35 ILCS 200/31-10

Indiana flat income tax rate

Indiana taxes adjusted gross income, including capital gain, at one flat state rate.

Why it matters: The state share of a sale is the flat rate times the gain, before county tax.

Source: Indiana DOR Departmental Notice #1

Indiana county income tax

Every Indiana county levies an income tax on residents based on the county where they live on January 1.

Why it matters: County tax applies to the same income as the state tax, so a big gain also raises the county bill.

Source: Indiana DOR Departmental Notice #1

Iowa flat income tax rate

Iowa taxes all taxable income, including capital gain, at one flat rate.

Why it matters: The Iowa share of a sale is the flat rate times the gain reported each year.

Source: Iowa Code 422.5

Iowa capital gain deduction (farm property)

Iowa excludes net capital gain from selling farm real property when the seller materially participated and held it at least ten years, plus a few other narrow cases.

Why it matters: A qualifying farm sale can be free of Iowa income tax, while non-farm real estate and most business sales get no break.

Source: Iowa Code 422.7

Iowa IRC conformity

Iowa follows the Internal Revenue Code as amended (rolling conformity) for tax years from 2020.

Why it matters: Federal changes, including the One Big Beautiful Bill Act, generally flow into Iowa unless Iowa decouples.

Source: Iowa Code 422.3(5)

Kansas top income tax rate

Kansas taxes capital gain as ordinary income at two brackets, 5.2% and 5.58%.

Why it matters: Nearly all of a large gain is taxed at 5.58%.

Source: Kansas 2026 Form K-40ES

Kentucky flat income tax rate

Kentucky taxes all net income, including capital gain, at one flat rate.

Why it matters: Every dollar of gain recognized in Kentucky costs the same rate, so the state share scales directly with the gain reported each year.

Source: KRS 141.020(2)(f)

Kentucky capital gain treatment

Kentucky has no capital gain rate or general exclusion; the only gain carve-out is for property taken by eminent domain.

Why it matters: Capital gain and depreciation recapture are taxed alike, so the sale's character does not change the Kentucky bill.

Source: KRS 141.019(1)(j)

Kentucky treatment of installment sales and nonresident sellers

Kentucky starts from federal adjusted gross income, so it follows the federal installment method, and it taxes nonresidents on income from tangible property located in Kentucky.

Why it matters: Kentucky tax on a Kentucky property sale follows each payment, including payments received after the seller moves away.

Source: KRS 141.020(4); KRS 141.010

Kentucky bonus depreciation and Section 179 limits

Kentucky allows only Section 168 depreciation as in effect on December 31, 2001 (no bonus) and Section 179 expensing as in effect on December 31, 2003.

Why it matters: Different Kentucky depreciation means a different Kentucky basis, so the state gain and recapture on sale can differ from the federal numbers.

Source: KRS 141.0101(16)

Kentucky inheritance tax

Kentucky has an inheritance tax on heirs outside the close family classes; spouses, parents, children, grandchildren, siblings, nieces and nephews (Class A) are fully exempt.

Why it matters: An installment note or sale proceeds left to a Class B or Class C heir can lose up to 16% to the state at death.

Source: KRS 140.070; KRS 140.080

Kentucky Social Security exclusion

Kentucky excludes Social Security benefits that are taxed federally.

Why it matters: A sale year that makes more Social Security federally taxable does not raise the Kentucky bill on those benefits.

Source: KRS 141.019(1)(e)

Kentucky real estate transfer tax

Kentucky imposes a transfer tax on the grantor named in the deed.

Why it matters: It is a closing cost the seller pays on the full price, which reduces net proceeds regardless of the deferral path.

Source: KRS 142.050(2)

Kentucky IRC conformity date

Kentucky follows the Internal Revenue Code as of a fixed date that the legislature updates.

Why it matters: Federal changes after the fixed date do not reach the Kentucky return until Kentucky adopts them.

Source: KRS 141.010(21)

Louisiana flat income tax rate

Louisiana taxes individual income, including capital gain, at one flat rate since 2025.

Why it matters: The state cost of each year's recognized gain is a fixed percentage.

Source: Louisiana Department of Revenue, individual income tax

Louisiana capital gain deduction for a Louisiana business (grandfathered)

Louisiana's deduction for net capital gain from selling a Louisiana-domiciled nonpublic business held at least five years now applies only to installment and completed sales made before January 1, 2025.

Why it matters: A seller still collecting installment payments from a pre-2025 qualifying business sale can keep deducting that gain; new sales are taxed at 3%.

Source: Louisiana 2025 IT-540 instructions, code 20E

Louisiana Social Security exemption

Social Security benefits taxed on the federal return are exempt from Louisiana tax.

Why it matters: A sale year that makes more Social Security federally taxable does not add Louisiana tax on those benefits.

Source: Louisiana 2025 IT-540 instructions, code 07E

Maine top rate including the 2026 surcharge

Maine taxes capital gain as ordinary income at up to 7.15%, and from 2026 adds a 2% surcharge on very high taxable income.

Why it matters: A one-year sale can push income over the surcharge line, while spreading gain can keep each year under it.

Source: Maine Revenue Services, 2026 individual income tax rate schedules

Maine capital gain treatment

Maine has no separate capital gain rate or general exclusion.

Why it matters: Gain is stacked on other income in the regular brackets, so the timing of recognition sets the rate.

Source: 36 M.R.S. 5111

Maine sourcing of installment gain for nonresidents

Maine follows the federal installment method and treats gain from Maine real or tangible property as Maine-source income for a nonresident.

Why it matters: Moving out of Maine does not stop Maine tax on later payments from a Maine property sale.

Source: 36 M.R.S. 5142

Maine real estate withholding

Buyers of Maine real property must withhold part of the price unless the seller certifies Maine residency or another exception applies.

Why it matters: A nonresident seller has 2.5% of the price held back at closing, which matters most when an installment structure defers most of the tax.

Source: 36 M.R.S. 5250-A

Maine bonus depreciation add-back

Maine adds back federal 168(k) bonus depreciation and lets it back over later years, with a basis adjustment when the property is sold.

Why it matters: Maine basis differs from federal basis, so Maine gain on sale is adjusted by the bonus not yet recovered.

Source: 36 M.R.S. 5122

Maine estate tax exclusion

Maine taxes estates above its own exclusion, well below the federal amount.

Why it matters: A seller holding a large note or sale proceeds can owe Maine estate tax even with no federal estate tax.

Source: Maine Revenue Services, estate tax (706ME)

Maine Social Security subtraction

Maine subtracts Social Security benefits included in federal AGI.

Why it matters: Extra Social Security made taxable federally by a sale year does not raise Maine tax.

Source: 36 M.R.S. 5122(2)(C)

Maine real estate transfer tax

Maine's transfer tax is split between grantor and grantee, with a higher rate on value over $1 million since November 1, 2025.

Why it matters: On a large sale the seller's half of the added tier above $1 million is a noticeable closing cost.

Source: 36 M.R.S. 4641-A

Maine IRC conformity date

Maine follows the Internal Revenue Code as of a fixed date updated by annual legislation.

Why it matters: Federal changes after the date do not apply in Maine until adopted.

Source: 36 M.R.S. 111(1-A)

Maryland top state rate on capital gain

Maryland taxes capital gain as ordinary income at up to 6.5%, plus county income tax and the 2% capital gain tax.

Why it matters: A resident selling in one year can face about 11.8% combined state, county and capital gain tax on the top slice.

Source: Md. Code, Tax-General 10-105

Maryland 2% tax on net capital gain

Maryland adds 2% on net capital gain included in Maryland AGI when federal AGI exceeds $350,000, with exemptions such as a primary residence sold for under $1.5 million.

Why it matters: Spreading gain so federal AGI stays at or under $350,000 in a year avoids the extra 2% for that year; investment real estate is not exempt.

Source: Md. Code, Tax-General 10-105(a)(3)-(4)

Maryland nonresident real property withholding

Maryland collects income tax at recording when a nonresident sells Maryland real property.

Why it matters: A nonresident seller has a slice of the payment held back at closing even if the gain is being deferred.

Source: Comptroller of Maryland, Form MW506NRS (2025)

Maryland bonus depreciation and Section 179 decoupling

Maryland computes depreciation without 168(k) bonus and limits Section 179 to the pre-2003 dollar amounts.

Why it matters: Maryland basis differs from federal basis, which changes the Maryland gain on sale.

Source: Md. Code, Tax-General 10-210.1

Maryland estate and inheritance taxes

Maryland has both an estate tax above $5 million and a 10% inheritance tax on heirs outside the close family.

Why it matters: Sale proceeds or a note left to a nephew, friend or other non-exempt heir can face 10% inheritance tax plus estate tax.

Source: Md. Code, Tax-General 7-309; 7-204; 7-203

Maryland Social Security subtraction

Maryland subtracts Social Security and railroad retirement benefits.

Why it matters: A sale year that makes more Social Security federally taxable adds no Maryland tax on those benefits.

Source: Md. Code, Tax-General 10-207(j)

Maryland county income tax

Every Maryland county and Baltimore City levies an income tax on Maryland taxable income, including capital gain.

Why it matters: County tax adds 2.25% to 3.30% to every dollar of gain a resident recognizes.

Source: Md. Code, Tax-General 10-106

Maryland state transfer tax

Maryland's state transfer tax is 0.5% of consideration, with county transfer and recordation taxes on top.

Why it matters: Transfer and recordation taxes are among the largest closing costs on a Maryland sale; the seller pays all of the reduced state tax on a sale to a first-time Maryland homebuyer.

Source: Md. Code, Tax-Property 13-203

Maryland IRC conformity

Maryland generally follows the Code as amended, but a federal amendment with a state revenue impact of $5 million or more does not apply for the year it is enacted or earlier years unless the law says otherwise.

Why it matters: Big federal changes, such as those in a midyear tax act, may not reach the Maryland return until the following year.

Source: Md. Code, Tax-General 10-108

Massachusetts rate on long-term gain including the 4% surtax

Massachusetts taxes long-term gain at 5% and short-term gain at 8.5%, plus a 4% surtax on taxable income above an indexed threshold.

Why it matters: A one-year sale over the threshold adds 4% on the excess; spreading gain can keep each year under it.

Source: M.G.L. c. 62, s. 4; 2026 threshold per DOR

Massachusetts separate capital gain classes

Massachusetts splits income into Parts A, B and C; long-term gain (Part C) is taxed at the Part B rate, and a loss in one Part cannot reduce the surtax base in another.

Why it matters: Holding period and the Part rules decide whether gain is taxed at 5% or 8.5% and how much of it is exposed to the surtax.

Source: M.G.L. c. 62, s. 4(c)-(d)

Massachusetts installment transaction election and security

For an installment sale that would otherwise create $1,000,000 or more of Massachusetts gross income, the seller must elect either to defer and post security for the extra tax, or to report the whole gain in the year of sale.

Why it matters: Deferral is available in Massachusetts only if the seller deposits security for the tax difference, which ties up cash; otherwise the full gain is taxed up front.

Source: M.G.L. c. 62, s. 63; 830 CMR 62.5A.1(3)(d)

Massachusetts claw-back on exchanges into out-of-state property

Massachusetts follows 1031 deferral, but when out-of-state replacement property is later sold, the gain reflecting appreciation of the Massachusetts property is Massachusetts-source income.

Why it matters: Leaving Massachusetts through a 1031 exchange does not erase the Massachusetts tax on the deferred gain.

Source: 830 CMR 62.5A.1(3)(d) (Cornell LII)

Massachusetts Opportunity Zone conformity

Massachusetts follows the original federal OZ deferral under its 2024 Code date, but from tax year 2026 a qualified opportunity zone must be located entirely in Massachusetts.

Why it matters: Rolling gain into an out-of-state Opportunity Zone fund in 2026 or later does not defer the Massachusetts tax.

Source: Acts of 2026, Chapter 101

Massachusetts capital loss carryovers

Massachusetts keeps its own Part A (short-term) and Part C (long-term) capital loss carryovers, carried forward indefinitely.

Why it matters: State loss carryovers can differ from federal ones and only offset gain in the matching Massachusetts Part.

Source: M.G.L. c. 62, s. 2(c)

Massachusetts bonus depreciation decoupling

Massachusetts does not allow the federal 168(k) bonus depreciation deduction for personal income tax.

Why it matters: Massachusetts basis is higher than federal basis after bonus, so Massachusetts gain on sale is lower than federal.

Source: M.G.L. c. 62, s. 2(d)(1)(N)

Massachusetts estate tax threshold

Massachusetts taxes estates over $2 million.

Why it matters: A seller holding sale proceeds or a note can owe Massachusetts estate tax far below the federal exclusion.

Source: M.G.L. c. 65C, s. 2A

Massachusetts Social Security exclusion

Massachusetts removes Social Security benefits included in federal gross income.

Why it matters: Extra Social Security made taxable federally by a sale year does not raise the Massachusetts bill.

Source: M.G.L. c. 62, s. 2(a)(2)(H)

Massachusetts deeds excise

Massachusetts imposes an excise on deeds based on the price, customarily paid by the seller.

Why it matters: It is a seller closing cost on the full price.

Source: M.G.L. c. 64D, s. 1

Massachusetts IRC conformity date

Massachusetts personal income tax follows the Code as amended on January 1, 2024, with a rolling list of specific sections, and a 2026 law automatically decouples from new federal amendments unless the revenue impact is small.

Why it matters: Federal changes from 2025 onward (including OBBBA) generally do not apply in Massachusetts unless adopted.

Source: M.G.L. c. 62, s. 1(c)

Michigan flat income tax rate

Michigan taxes income, including capital gain, at a flat rate that can be cut only by a revenue trigger.

Why it matters: The state cost of each year's gain is a fixed percentage, plus city tax where it applies.

Source: Michigan Treasury, 2026 rate determination; MCL 206.51

Michigan capital gain treatment

Michigan has no separate capital gain rate.

Why it matters: Gain and recapture are taxed alike at the flat rate.

Source: MCL 206.51

Michigan city income tax on capital gain

Cities using the uniform city income tax ordinance tax residents on capital gain and nonresidents on gain from property located in the city.

Why it matters: A resident of a taxing city pays city tax on the whole gain; a nonresident pays the lower rate on gain from city property.

Source: MCL 141.611-141.613; MCL 141.503

Michigan Social Security deduction

Michigan deducts Social Security benefits included in federal AGI.

Why it matters: A sale year that makes more Social Security federally taxable adds no Michigan tax on those benefits.

Source: MCL 206.30

Michigan state and county transfer taxes

Michigan levies state and county real estate transfer taxes on the seller or grantor.

Why it matters: Together they are about 0.86% of the price in most counties, a direct seller closing cost.

Source: MCL 207.523, 207.525; MCL 207.502, 207.504

Michigan IRC conformity date

Michigan uses the Code in effect on January 1, 2025, or at the taxpayer's option the Code in effect for the tax year.

Why it matters: The option lets a seller use current federal rules when they help.

Source: MCL 206.12(3)

Minnesota top rate on capital gain

Minnesota taxes capital gain as ordinary income, topping out at 9.85%, plus a 1% tax on net investment income over $1 million.

Why it matters: A large sale year lands almost all of the gain in the 9.85% bracket, and the part of investment income above $1 million picks up another 1%.

Source: Minnesota Department of Revenue, 2026 income tax rates and brackets; Minn. Stat. 290.033

Minnesota net investment income tax and farmland carve-out

Minnesota has no capital gain rate break, but its separate 1% tax on net investment income over $1 million excludes gain on class 2a agricultural land.

Why it matters: Spreading gain so that each year's net investment income stays under $1 million avoids the extra 1%, and a farm sale escapes it entirely.

Source: Minn. Stat. 290.033

Minnesota sourcing of installment gain after a move

Minnesota follows the federal installment method, and gain from real or tangible property located in Minnesota is assigned to Minnesota even for a nonresident.

Why it matters: Moving out of Minnesota does not take later installment payments on Minnesota property out of Minnesota tax.

Source: Minn. Stat. 290.17, subd. 2

Minnesota bonus depreciation add-back

Minnesota adds back 80% of federal bonus depreciation and lets you subtract it back in equal fifths over the next five years.

Why it matters: A cost segregation or bonus deduction is worth less and later in Minnesota, and the timing difference must be tracked if the property is sold within those years.

Source: Minn. Stat. 290.0133, subd. 11 and 12; 290.0134, subd. 13

Minnesota estate tax exclusion

Minnesota taxes estates above a $3 million exclusion at rates from 13% to 16%.

Why it matters: Sale proceeds or an unpaid installment note held at death count toward a Minnesota estate far below the federal $15 million exclusion.

Source: Minn. Stat. 291.016, subd. 3; MDOR estate tax rates

Minnesota Social Security subtraction phase-out

Minnesota lets you subtract taxable Social Security, but the simplified subtraction shrinks 10% for each $4,000 of adjusted gross income above an inflation-adjusted threshold.

Why it matters: A big gain year pushes adjusted gross income far past the threshold, so Social Security becomes fully taxable in Minnesota that year.

Source: Minn. Stat. 290.0132, subd. 26

Minnesota deed tax

Minnesota charges a deed tax on the net consideration when real property is conveyed.

Why it matters: It is a closing cost on the sale price that reduces net proceeds regardless of how the gain is taxed.

Source: Minn. Stat. 287.21

Minnesota Internal Revenue Code date

Minnesota follows the Internal Revenue Code only as amended through a fixed date, so later federal changes apply only if the legislature adopts them.

Why it matters: Federal changes enacted after that date, including the 2025 federal tax law, may not flow through to the Minnesota return without an adjustment.

Source: Minn. Stat. 290.01, subd. 19 and 31

Mississippi rate on capital gain

Mississippi taxes income over $10,000 at a single rate that is stepping down each year.

Why it matters: The rate in each payment year sets the state cost of every installment, so later years cost less.

Source: Mississippi DOR, individual income tax rates

Mississippi capital gain treatment

Mississippi has no separate capital gain rate; all income is taxed at the same rate and capital loss limits follow federal rules.

Why it matters: Gain from a direct real estate sale gets no state rate break, so deferral or loss harvesting is the only lever.

Source: Mississippi DOR, 2025 Form 80-100 instructions

Mississippi Social Security and retirement exemption

Mississippi exempts Social Security, Railroad Retirement and qualified retirement plan income in full.

Why it matters: Sale gain does not cause Social Security to become state-taxable the way it can federally.

Source: Mississippi DOR, 2025 Form 80-100 instructions

Missouri rate on sale income

Missouri subtracts all federal capital gain, so only the ordinary parts of a sale, such as depreciation recapture and note interest, meet its graduated rates.

Why it matters: For a Missouri seller the state tax on a big sale is mostly about recapture and interest, not the capital gain.

Source: Missouri DOR, 2025 individual income tax year changes; RSMo 143.011

Missouri 100% capital gain subtraction

Missouri subtracts 100% of income reported as capital gain for federal purposes, with no in-state or property-type limit.

Why it matters: Each year's installment capital gain is also subtracted, so deferral planning matters little for Missouri tax on the gain itself; ordinary recapture stays taxable.

Source: RSMo 143.121.3(14); Missouri DOR capital gains subtraction FAQs

Missouri value of capital loss carryforwards

Missouri follows the federal carryover, but a loss used against capital gain that Missouri already exempts saves no Missouri tax.

Why it matters: Harvested losses help only the federal return for a Missouri seller.

Source: Missouri DOR capital gains subtraction FAQs

Missouri Social Security exemption

Missouri subtracts 100% of taxable Social Security regardless of income.

Why it matters: A high-income sale year does not make Social Security taxable in Missouri.

Source: RSMo 143.125

Montana rate on long-term capital gain

Montana taxes net long-term capital gain on its own lower schedule, 3.0% then 4.1%, stacked on top of other income.

Why it matters: Most of a big long-term gain is taxed at 4.1%, while recapture and note interest are ordinary income at up to 5.65%.

Source: MCA 15-30-2103

Montana Entrepreneur Magnet 0% rate

Montana applies a 0% rate to long-term gain on stock of a corporation that meets in-state activity, officer and employee tests.

Why it matters: A qualifying business owner selling corporate stock can pay no Montana tax on the gain.

Source: MCA 15-30-3703 and 15-30-3704

Montana source of deferred 1031 gain

Gain realized on Montana real property keeps its Montana source character and is taxed by Montana when it is recognized federally, even if the replacement property is out of state.

Why it matters: Exchanging Montana property into another state and moving does not end Montana's claim on the deferred gain.

Source: Mont. Admin. R. 42.2.308 (Cornell LII)

Nebraska top rate on capital gain

Nebraska taxes capital gain as ordinary income at a top rate that is falling each year.

Why it matters: Gain recognized in 2027 or later is taxed at 3.99% instead of 4.55%, which favors spreading payments forward.

Source: Neb. Rev. Stat. 77-2715.03

Nebraska one-time employer stock election

A Nebraska resident may once in a lifetime elect to subtract capital gain on stock of one corporation acquired through employment.

Why it matters: An owner-employee selling qualifying company stock may remove that gain from Nebraska tax.

Source: Neb. Rev. Stat. 77-2715.09

Nebraska county inheritance tax

Nebraska heirs pay inheritance tax based on their relationship to the decedent, with spouses exempt.

Why it matters: Unspent sale proceeds or an installment note left to children or others can owe Nebraska inheritance tax.

Source: Neb. Rev. Stat. 77-2004, 77-2005, 77-2006

Nebraska Social Security exemption

Nebraska subtracts 100% of Social Security included in federal AGI.

Why it matters: A high-income sale year does not make Social Security taxable in Nebraska.

Source: Neb. Rev. Stat. 77-2716

Nebraska documentary stamp tax

Nebraska imposes a documentary stamp tax on the grantor (seller) when a deed is recorded.

Why it matters: It is a seller closing cost on the full price, including liens assumed.

Source: Neb. Rev. Stat. 76-901 (as amended by LB 78, 2025)

Nevada real property transfer tax

Nevada has no income tax but charges a real property transfer tax on each deed or land sale installment contract.

Why it matters: It is the main state-level cost of a Nevada property sale and is due at recording.

Source: NRS 375.020, 375.023, 375.026, 375.030

New Hampshire real estate transfer tax

New Hampshire taxes each real estate sale at $0.75 per $100 of price, charged separately to both the buyer and the seller.

Why it matters: The seller's half comes straight off the proceeds at closing, so a $3M sale costs the seller about $22,500.

Source: RSA 78-B:1 and 78-B:4

New Jersey top rate on capital gain

New Jersey taxes gain from selling property as ordinary income in its own income category, with graduated rates up to 10.75%.

Why it matters: A large gain in one year climbs to the 10.75% bracket, so spreading it over several years can keep more of it in lower brackets.

Source: NJ-1040 instructions, tax rate schedules

New Jersey capital loss carryover

New Jersey lets losses offset gains only within the same income category in the same year and allows no carryback or carryover.

Why it matters: Federal capital loss carryforwards are worthless against a New Jersey gain, so losses must be harvested in the same year as each payment to help.

Source: NJ-1040 instructions

New Jersey installment sale reporting

New Jersey requires installment sale gain to be reported in the same years as on the federal return, with a separate New Jersey calculation if New Jersey basis differs.

Why it matters: Spreading the gain federally also spreads it for New Jersey, which can keep each year out of the 10.75% bracket.

Source: NJ-1040 instructions, Schedule NJ-DOP

New Jersey nonresident seller estimated payment (GIT/REP-1)

A nonresident selling New Jersey property must pay estimated income tax at closing before the deed can be recorded.

Why it matters: Cash is held back at closing even on an installment sale, which changes how much the seller can put to work right away.

Source: NJ Form GIT/REP-1

New Jersey Opportunity Zone conformity

New Jersey follows the federal deferral of gains reinvested in a qualified opportunity fund and the 10-year basis election.

Why it matters: A New Jersey seller gets state deferral alongside federal deferral, which makes the Opportunity Zone path worth more than in decoupled states.

Source: NJ Division of Taxation, TCJA Opportunity Zones

New Jersey bonus depreciation and Section 179 adjustment

New Jersey does not follow federal bonus depreciation or the full Section 179 expense for assets placed in service after 2003 and requires a separate depreciation schedule.

Why it matters: New Jersey basis differs from federal basis, so the New Jersey gain and recapture on sale come out different from the federal numbers.

Source: NJ-1040 instructions (GIT-DEP)

New Jersey inheritance tax

New Jersey has no estate tax for deaths after 2017 but still taxes inheritances left to siblings, in-laws and unrelated heirs.

Why it matters: An unpaid installment note or sale proceeds left to a sibling, niece or friend can lose 11% to 16% to inheritance tax.

Source: NJ Division of Taxation, inheritance tax rates

New Jersey Social Security taxation

New Jersey does not tax federal Social Security benefits.

Why it matters: A sale year that makes more of your benefit taxable federally adds nothing to the New Jersey bill.

Source: NJ-1040 instructions, exempt income

New Jersey pension and retirement exclusion income cliff

Taxpayers 62 or older can exclude up to $100,000 (joint) of pension and retirement income, but only if total income is $150,000 or less.

Why it matters: A sale year that pushes income over $150,000 wipes out the whole exclusion, while spreading the gain can keep it in other years.

Source: NJ-1040 instructions, line 28a

New Jersey realty transfer fee

New Jersey charges the seller a graduated realty transfer fee when the deed is recorded.

Why it matters: It comes off the seller's proceeds and rises to about 1.21% on the part of the price over $1M.

Source: NJ Division of Taxation, Realty Transfer Fee FAQ

New Jersey graduated percent fee (former mansion tax), seller-paid

Since July 10, 2025, the fee on New Jersey transfers over $1M is charged to the seller at a rate applied to the whole price.

Why it matters: On a large sale it adds 1% to 3.5% of the entire price to the seller's closing costs, on top of the realty transfer fee.

Source: NJ Division of Taxation memo, Graduated Percent Fee (July 2, 2025)

New Mexico top rate on capital gain

New Mexico taxes capital gain as ordinary income with a top rate of 5.9%.

Why it matters: A large sale lands most of the gain in the 5.9% bracket unless it is spread across years.

Source: NM HB 252 (2024), NMSA 7-2-7

New Mexico capital gains deduction

New Mexico deducts the greater of up to $2,500 of net capital gain or 40% of up to $1M of gain from the sale of a business allocated to New Mexico.

Why it matters: A business seller can shelter up to $400,000 of gain from state tax, while a real estate or investment seller gets only $2,500.

Source: NM HB 252 (2024), NMSA 7-2-34

New Mexico Social Security exemption income limit

New Mexico exempts taxable Social Security benefits only when adjusted gross income is at or below a fixed limit.

Why it matters: The limit is a cliff, so a sale year above it makes the whole taxable benefit subject to New Mexico tax; spreading the gain can protect other years.

Source: NM HB 163 (2022), NMSA 7-2-5.14

New York top rate on capital gain

New York taxes capital gain as ordinary income, and high incomes lose the lower brackets so the whole income is taxed at the flat top rate for its band.

Why it matters: A one-year sale can push all income into the 9.65%, 10.3% or 10.9% band, so spreading the gain can lower the state rate on every dollar.

Source: NY Form IT-2663 (2026) and IT-201 instructions

New York installment gain acceleration on moving out

A New York resident who moves away must accrue the remaining installment gain into the final resident period unless a bond or other acceptable security is filed.

Why it matters: Moving to a no-tax state does not escape New York tax on a note made while a resident, and without a bond the whole deferred gain is taxed at once; gain on New York real property stays New York source for nonresidents anyway.

Source: NY TSB-A-24(9)I; IT-203 instructions, special accruals

New York nonresident real property estimated tax (IT-2663)

A nonresident selling New York real property must pay estimated income tax on the gain before the deed is recorded.

Why it matters: Cash is taken at closing; on an installment sale only the gain reported in the year of sale is due then, later payments use normal estimates.

Source: NY Form IT-2663 instructions (2026)

New York Opportunity Zone deferral addback

New York adds back gain deferred into a qualified opportunity fund in the year of the sale and subtracts it later when it is included federally.

Why it matters: New York tax on the gain is due in the sale year even if federal tax is deferred, which shrinks the Opportunity Zone advantage for New Yorkers.

Source: NY Form IT-225 instructions

New York bonus depreciation decoupling

New York does not follow federal Section 168(k) bonus depreciation for most property placed in service after May 2003 and uses its own depreciation schedule.

Why it matters: New York basis and depreciation differ from federal, so the New York gain on sale differs too and the adjustments reverse on the sale.

Source: NY Form IT-225 instructions

New York estate tax exclusion and cliff

New York taxes estates over its basic exclusion amount, and an estate more than 105% of the exclusion loses the exclusion entirely.

Why it matters: Sale proceeds or a note that push an estate just over the line can trigger tax on the whole estate, not just the excess.

Source: NY Department of Taxation and Finance, estate tax

New York Social Security taxation

New York excludes Social Security benefits included in federal AGI.

Why it matters: A sale year that makes more of your benefit taxable federally adds nothing to the New York bill.

Source: NY tax expenditure report, personal income tax

New York City and Yonkers resident income tax

New York City residents pay a city income tax on the same income as the state, and Yonkers residents pay a surcharge on their net state tax.

Why it matters: Capital gain is in the base, so a city resident's sale year carries roughly another 3.9 points of tax.

Source: NY IT-201 instructions

New York State real estate transfer tax

New York State charges the seller a transfer tax on each deed, with an extra base tax on large New York City sales.

Why it matters: It comes off the seller's proceeds; in New York City the rate rises to 0.65% on residential sales of $3M or more and other property of $2M or more.

Source: NY Department of Taxation and Finance, real estate transfer tax

New York City real property transfer tax

New York City adds its own transfer tax on sales of city property, charged at closing on top of the state tax.

Why it matters: On a commercial or investment building over $500,000 it takes 2.625% of the whole price, a large closing cost the seller usually bears.

Source: NYC Department of Finance, RPTT

North Carolina flat rate on capital gain

North Carolina taxes capital gain as ordinary income at one flat rate.

Why it matters: Every dollar of gain costs the same state rate, so timing changes the state bill only if future rates fall.

Source: NCDOR tax rate schedules

North Carolina Opportunity Zone decoupling

North Carolina adds back gain deferred into a qualified opportunity fund and also adds back the 10-year exclusion.

Why it matters: A North Carolina seller pays state tax on the gain in the sale year and on fund appreciation at exit, so the Opportunity Zone benefit is federal only.

Source: G.S. 105-153.5(c2)(5) to (7)

North Carolina bonus depreciation and Section 179 addback

North Carolina adds back 85% of federal bonus depreciation and of Section 179 expense above its own limits, then deducts the addback over five years.

Why it matters: Bonus depreciation taken before a sale is only partly allowed for state purposes, which changes the state tax picture in the years around the sale.

Source: G.S. 105-153.6

North Carolina Social Security taxation

North Carolina deducts Social Security benefits included in federal AGI.

Why it matters: A sale year that makes more of your benefit taxable federally adds nothing to the North Carolina bill.

Source: G.S. 105-153.5(b)(3)

North Carolina real estate excise tax

North Carolina charges the transferor an excise tax on each deed before it is recorded.

Why it matters: It is a modest seller closing cost, about $2 per $1,000 of price.

Source: G.S. 105-228.30

North Carolina IRC conformity date

North Carolina follows the Internal Revenue Code only as of a fixed date set by statute.

Why it matters: Federal changes after that date, including 2025 law changes, apply for North Carolina only if the legislature adopts them, so state and federal results can differ.

Source: G.S. 105-228.90 (definition of Code)

North Dakota top income tax rate

North Dakota has two taxed brackets, and the top 2.5% bracket applies to taxable income above an inflation-indexed threshold.

Why it matters: The top rate sets the North Dakota cost of the 60% of long-term gain that is not excluded.

Source: ND 2025 Individual Income Tax Booklet, tax rate schedules

North Dakota 40% long-term capital gain exclusion

North Dakota subtracts 40% of net long-term capital gain (after net short-term loss) from taxable income.

Why it matters: Only 60% of a long-term gain is taxed, so the effective top rate on that gain is about 1.5%.

Source: N.D.C.C. 57-38-30.3(2)(d)

North Dakota Social Security subtraction

Social Security benefits included in federal adjusted gross income are subtracted on the North Dakota return.

Why it matters: A sale that makes more benefits federally taxable does not add North Dakota tax on those benefits.

Source: N.D.C.C. 57-38-30.3(2)(s)

North Dakota IRC conformity

North Dakota defines the Internal Revenue Code as the Code "as amended," so federal changes generally flow through.

Why it matters: Federal changes such as the 2025 One Big Beautiful Bill Act provisions generally carry into the North Dakota starting point without a state conformity bill.

Source: N.D.C.C. 57-38-01(5)

Ohio nonbusiness income tax rate

From 2026 Ohio taxes nonbusiness income above $26,050 at a single 2.75% rate.

Why it matters: Gain on investment property that is not business income is taxed at this rate.

Source: ORC 5747.02(A)(3)

Ohio business income deduction and 3% business rate

Ohio deducts the first $250,000 of business income ($125,000 married filing separately) and taxes the rest of business income at a flat 3%.

Why it matters: Gain from selling a business or business assets can be business income, so the first $250,000 is untaxed and the rest pays 3%.

Source: ORC 5747.01(A)(28), 5747.02(A)(4)

Ohio bonus depreciation and Section 179 add-back

Ohio adds back five-sixths of federal bonus depreciation and of qualifying Section 179 expense (two-thirds for some employers that grow payroll) and allows it back in later years.

Why it matters: Ohio basis and depreciation run behind federal, which shifts Ohio deductions and gain timing around a sale.

Source: ORC 5747.01(A)(17)

Ohio Social Security deduction

Ohio deducts Social Security (Title II) benefits included in federal adjusted gross income.

Why it matters: A sale year that makes more benefits federally taxable does not raise Ohio tax on them.

Source: ORC 5747.01(A)

Ohio municipal income tax on sale gains

Ohio cities may not tax intangible income such as capital gains on stock, and business net profit excludes gain on capital and Section 1231 assets except the Section 1245 and 1250 recapture portion.

Why it matters: A city income tax can reach the depreciation recapture part of a business or rental property sale even though the rest of the gain is excluded.

Source: ORC 718.01(C), (E)(4)

Ohio real property conveyance fee

Ohio counties charge a conveyance fee on deeds made up of a required 10 cents per $100 plus an optional county tax of up to 30 cents per $100, levied on the grantor.

Why it matters: The seller pays up to 0.4% of the price at closing, which reduces net proceeds.

Source: ORC 319.54(G)(3), 322.02

Ohio IRC conformity date

Ohio references the Internal Revenue Code as it existed on the effective date of the latest conformity bill.

Why it matters: Federal changes after that date do not apply in Ohio until a new bill updates the date.

Source: ORC 5701.11

Oklahoma top income tax rate

House Bill 2764 cut Oklahoma to three brackets with a 4.5% top rate from 2026.

Why it matters: Gain that does not qualify for the Oklahoma capital gain deduction is taxed at this rate.

Source: Tax Foundation, 2026 State Income Tax Rates and Brackets

Oklahoma capital gain deduction

Oklahoma deducts qualifying net capital gain on Oklahoma real or tangible property held at least five years, and on Oklahoma-headquartered company interests or business asset sales held at least two years; residents also exclude gains on real property in another state.

Why it matters: A qualifying Oklahoma sale can owe no Oklahoma tax on the capital gain at all.

Source: Oklahoma Form 511 instructions, Schedule 511-A line 12

Oklahoma bonus depreciation

Oklahoma allows 100% Oklahoma bonus depreciation on qualified property and qualified improvement property in the year placed in service.

Why it matters: Oklahoma basis can track federal expensing, so depreciation recapture on a later sale is similar for both returns.

Source: Oklahoma Form 511 instructions, A15 and B8

Oklahoma Social Security subtraction

Social Security benefits included in federal adjusted gross income are subtracted on the Oklahoma return.

Why it matters: Extra federally taxable benefits in a sale year add no Oklahoma tax.

Source: Oklahoma Form 511 instructions, Schedule 511-A line 1

Oklahoma documentary stamp tax

Oklahoma taxes each deed conveying real property sold for more than $100.

Why it matters: The stamp tax is a closing cost that comes out of the deal at 0.15% of the consideration.

Source: 68 O.S. 3201 (Oklahoma Tax Commission notice)

Oregon top income tax rate

Oregon taxes capital gain as ordinary income at graduated rates up to 9.9%.

Why it matters: A large gain lands almost entirely in the 9.9% bracket, one of the highest state rates.

Source: ORS 316.037; Tax Foundation 2026 brackets

Oregon reduced rate on farm capital gain

Oregon taxes certain long-term capital gain from farming property and farm business interests at 5% instead of the regular rates.

Why it matters: A qualifying farm sale can cut the Oregon rate on the gain roughly in half.

Source: ORS 316.045

Oregon interest charge on large installment notes

Oregon adds its own interest charge on deferred Oregon tax whenever federal Section 453A interest applies, using the Oregon top rate and Oregon deficiency interest rate.

Why it matters: A large nonfarm installment note pays two interest charges, federal and Oregon, which raises the cost of deferral.

Source: ORS 314.302

Oregon out-of-state 1031 replacement tracking

Oregon follows Section 1031, but if Oregon real property is exchanged for property in another state the owner files Form OR-24 every year and Oregon taxes the deferred Oregon gain when the replacement is sold.

Why it matters: Moving an exchange out of Oregon does not escape the Oregon gain; it follows the owner until the replacement is sold.

Source: ORS 316.738; Publication OR-17

Oregon Opportunity Zone conformity

Oregon has a rolling tie to federal taxable income and lists no Opportunity Zone exception.

Why it matters: Federal Opportunity Zone deferral and exclusion generally carry through to the Oregon return.

Source: Publication OR-17 (2025), Federal law connection

Oregon withholding on nonresident real estate sales

Escrow agents withhold from nonresident individual sellers of Oregon real property the least of 4% of the consideration, 8% of the Oregon gain, or the net proceeds.

Why it matters: Cash at closing is held back unless the seller documents a lower gain, though the withholding is credited on the Oregon return.

Source: ORS 314.258

Oregon bonus depreciation conformity

Oregon follows federal depreciation through its tie to federal taxable income and had not disconnected from new federal depreciation changes as of early 2026.

Why it matters: Oregon basis usually matches federal basis, so recapture on a sale is the same on both returns.

Source: Publication OR-17 (2025), Federal depreciation disconnect

Oregon estate tax

Oregon taxes estates over $1,000,000 at graduated rates from 10% to 16%.

Why it matters: A sale that turns property into cash or a note does not change the estate total, and Oregon's low threshold means many sellers are in range.

Source: ORS 118.010

Oregon Social Security subtraction

Oregon does not tax Social Security benefits included in federal income.

Why it matters: Extra federally taxable benefits in a sale year add no Oregon tax.

Source: Publication OR-17 (2025)

Portland-area Metro and Multnomah County income taxes

Residents of the Metro district pay a 1% supportive housing tax, and Multnomah County residents pay a Preschool for All tax of 1.5%, plus another 1.5% on higher income.

Why it matters: These taxes apply to taxable income including capital gain, lifting the top combined rate in Portland to about 13.9%.

Source: City of Portland Revenue Division (March 2026)

Oregon real estate transfer tax

Oregon bars local transfer taxes except those in effect in 1997; Washington County is the one county that still charges one.

Why it matters: Outside Washington County there is no transfer tax on the seller; inside it the cost is 0.1%.

Source: Washington County Assessment and Taxation; ORS 306.815

Oregon IRC conformity

Oregon has a rolling tie to the federal definition of taxable income, and for other purposes follows the Code as of a fixed date.

Why it matters: Federal changes to taxable income flow through automatically, while other federal changes wait for an Oregon update.

Source: Publication OR-17 (2025), Federal law connection

Pennsylvania personal income tax rate

Pennsylvania taxes each class of income, including net gains from property, at one flat rate.

Why it matters: Every dollar of Pennsylvania gain costs the same 3.07%, regardless of size.

Source: PA Department of Revenue, Tax Rates

Pennsylvania capital gain treatment

Pennsylvania has no capital gain rate or exclusion; net gains from the sale of property are a separate class of income.

Why it matters: Long-term and short-term gains and recapture are all taxed alike.

Source: PA PIT Guide, Net Gains (Losses)

Pennsylvania installment sale reporting

A deferred payment contract spanning more than one year can use the installment method for Pennsylvania, but a sale of intangible property cannot (it may use the cost recovery method instead).

Why it matters: Real estate and business assets can spread Pennsylvania gain like federal, while a stock sale on a note may not.

Source: PA PIT Guide, Net Gains (Losses)

Pennsylvania like-kind exchange deferral

Pennsylvania allows Section 1031 like-kind exchange deferral for exchanges on or after January 1, 2023.

Why it matters: Before 2023 Pennsylvania taxed exchange gain; now the state defers it along with federal.

Source: PA PIT Guide, Like-Kind Exchanges

Pennsylvania loss limits

Pennsylvania has no capital loss carryover and does not let a loss in one income class offset another class, or one spouse's loss offset the other spouse's gain.

Why it matters: Losses banked in earlier years are worthless for Pennsylvania, so timing losses into the sale year matters.

Source: PA PIT Guide, Net Gains (Losses)

Pennsylvania bonus depreciation

Pennsylvania does not allow federal bonus depreciation but does allow Section 179 expensing for tax years beginning in 2023 or later.

Why it matters: Pennsylvania basis is higher than federal after bonus depreciation, so the Pennsylvania gain on sale is smaller.

Source: PA PIT Guide, Net Income from a Business

Pennsylvania inheritance tax

Pennsylvania taxes inheritances by the heir's relationship to the decedent, with no dollar exemption.

Why it matters: Property or notes left to children are taxed at 4.5% of value, a cost the federal exemption does not touch.

Source: PA Department of Revenue, Tax Rates

Pennsylvania Social Security and retirement income

Social Security, railroad retirement and distributions from eligible retirement plans after retirement age are not taxable Pennsylvania compensation.

Why it matters: Higher income in a sale year does not pull benefits into Pennsylvania tax.

Source: PA PIT Guide, Gross Compensation

Philadelphia School Income Tax

Philadelphia residents pay the School Income Tax on unearned income such as dividends and short-term capital gains.

Why it matters: A short-term gain for a Philadelphia resident costs an extra 3.74%; long-term gains are not on the taxable list.

Source: City of Philadelphia, School Income Tax

Pennsylvania realty transfer tax

Pennsylvania charges 1% of the value of real estate transferred, usually with an additional local realty transfer tax, and the grantor and grantee are jointly liable.

Why it matters: Who pays the combined state and local tax is negotiated, and the seller's share is a direct cost of the sale.

Source: PA Department of Revenue, Realty Transfer Tax

Rhode Island top income tax rate

Rhode Island taxes capital gain as ordinary income with a 5.99% top bracket that is the same for all filing statuses.

Why it matters: Most of a large gain falls in the 5.99% bracket.

Source: Tax Foundation 2026 brackets; R.I. Gen. Laws 44-30-2.6

Rhode Island capital gain treatment

Rhode Island has no special capital gain rate; gain is taxed under the regular rate schedule.

Why it matters: Long-term gain and recapture pay the same rate.

Source: R.I. Gen. Laws 44-30-2.6

Rhode Island withholding on nonresident real estate sales

A buyer of Rhode Island real property from a nonresident withholds a percentage of the net proceeds paid to the seller.

Why it matters: Cash is held back at closing until the seller files and claims the credit.

Source: R.I. Gen. Laws 44-30-71.3

Rhode Island bonus depreciation decoupling

Rhode Island does not allow federal bonus depreciation and computes gain on a later sale using Rhode Island basis.

Why it matters: Rhode Island gain on sale is lower than federal gain after bonus depreciation was taken.

Source: R.I. Gen. Laws 44-61-1

Rhode Island estate tax

Rhode Island taxes estates above an inflation-indexed exemption.

Why it matters: The low threshold means sale proceeds and notes held at death can trigger state estate tax far below the federal exemption.

Source: RI Division of Taxation Advisory 2025-27

Rhode Island Social Security modification

Rhode Island exempts taxable Social Security only for people at full retirement age whose federal adjusted gross income is under an indexed limit.

Why it matters: A sale year that pushes income over the limit makes benefits taxable in Rhode Island.

Source: R.I. Gen. Laws 44-30-12(c)(8)

Rhode Island pension and annuity modification

Rhode Island subtracts up to $50,000 of taxable pension and annuity income for people at full retirement age under the same income limits as the Social Security modification.

Why it matters: A large gain in the sale year can cost the whole subtraction for that year.

Source: R.I. Gen. Laws 44-30-12(c)(9)

Rhode Island real estate conveyance tax

Rhode Island taxes deeds for realty sold, paid by the grantor unless the parties agree otherwise, with a second tier on the part of a residential price over $800,000.

Why it matters: The seller pays 0.75% of the price, and 1.5% on the residential portion above the threshold.

Source: R.I. Gen. Laws 44-25-1

South Carolina top income tax rate

Act 110 of 2026 moved South Carolina to two brackets with a 5.21% top rate and starts the calculation from federal AGI, replacing federal deductions with a South Carolina deduction that phases out by $190,000 of AGI for joint filers.

Why it matters: In a sale year the state deduction disappears and itemized deductions such as charitable gifts are not allowed, so most gain is taxed at 5.21% after the 44% deduction.

Source: SCDOR Information Letter #26-20

South Carolina 44% capital gain deduction

South Carolina deducts 44% of net capital gain recognized in the state.

Why it matters: Only 56% of the gain is taxed, for an effective rate of about 2.9% at the 2026 top rate.

Source: S.C. Code 12-6-1150

South Carolina withholding on seller-financed sales

When a nonresident seller finances a South Carolina real property sale, the buyer withholds on each installment payment unless the seller elects out of installment treatment for South Carolina and pays the full tax.

Why it matters: A nonresident on a note either has tax held from every payment or pays the state tax up front.

Source: S.C. Code 12-8-580(A)(2)

South Carolina withholding on nonresident real estate sales

A buyer of South Carolina real property from a nonresident withholds at the maximum individual rate on the gain (with a seller affidavit) or on the amount realized (without one).

Why it matters: Without a gain affidavit, withholding is figured on the full price and can tie up much more cash.

Source: S.C. Code 12-8-580

South Carolina bonus depreciation

South Carolina does not adopt federal bonus depreciation under IRC 168(k) or the new 168(n).

Why it matters: South Carolina basis is higher than federal after bonus depreciation, so the state gain on sale is smaller.

Source: S.C. Code 12-6-50

South Carolina Social Security treatment

South Carolina does not adopt IRC 86, so Social Security benefits are not part of South Carolina income.

Why it matters: Extra federally taxable benefits in a sale year add no South Carolina tax.

Source: S.C. Code 12-6-50(4)

South Carolina deed recording fee

South Carolina charges a fee for recording a deed based on the realty value, split between a state fee and a county fee.

Why it matters: The fee is a closing cost of 0.37% of value.

Source: S.C. Code 12-24-10, 12-24-90

South Carolina IRC conformity date

South Carolina adopts the Internal Revenue Code as of a fixed date that is updated by annual legislation.

Why it matters: Federal changes after that date apply only when the legislature adopts them.

Source: S.C. Code 12-6-40

South Dakota real estate transfer fee

South Dakota charges a fee on the privilege of transferring title to real property, paid by the grantor.

Why it matters: With no state income tax, this 0.1% fee is the main state cost of selling South Dakota real estate.

Source: SDCL 43-4-21

Tennessee excise tax on gains inside an entity

Tennessee has no individual income tax, but LLCs, LPs and corporations owe a 6.5% excise tax on net earnings unless exempt, and a family-owned entity loses its exemption if less than 66.67% of its receipts are passive investment income.

Why it matters: Gain on real property is not passive investment income for this test, so a large sale year can push a family LLC out of the exemption and expose the gain to 6.5%.

Source: TN Franchise and Excise Tax Manual (June 2026)

Utah flat income tax rate

Utah taxes all income, including capital gain, at one flat rate, cut to 4.45% for 2026 by S.B. 60.

Why it matters: Every dollar of Utah gain costs the same rate.

Source: Utah House, 2026 session summary (S.B. 60)

Utah Social Security credit

Utah taxes Social Security but offers a credit that is limited by household income, with the joint-filer threshold raised to $90,000 in 2025.

Why it matters: A large gain in the sale year can wipe out the credit for that year.

Source: Utah House, 2025 session summary (S.B. 71)

Vermont top rate and 3% minimum tax

Vermont's top bracket is 8.75%, and when federal AGI exceeds $150,000 the tax is the greater of the regular tax or 3% of federal AGI.

Why it matters: In a big sale year the 3% of AGI floor can override the capital gain exclusion, so the exclusion may save less than expected.

Source: 32 V.S.A. 5822(a)(6)

Vermont capital gain exclusion

Vermont excludes the greater of $5,000 or 40% of adjusted net capital gain on assets held more than three years, capped at 40% of federal taxable income or $350,000.

Why it matters: Business and investment real estate held over three years can shave up to $350,000 off Vermont income, but residences and publicly traded stock do not qualify for the 40% option.

Source: 32 V.S.A. 5811(21)(B)(ii)

Vermont withholding on nonresident real estate sales

A buyer of Vermont real property from a nonresident withholds 2.5% of the consideration unless a certificate waives it.

Why it matters: Cash is held back at closing based on price, not gain.

Source: 32 V.S.A. 5847

Vermont estate tax

Vermont taxes estates over $5,000,000 at a flat 16% on the excess.

Why it matters: Proceeds or notes held at death count toward the Vermont estate.

Source: 32 V.S.A. 7442a

Vermont Social Security exclusion

Vermont excludes taxable Social Security fully at lower income and phases the exclusion out as federal AGI rises.

Why it matters: A sale year above the phase-out makes all federally taxable benefits taxable in Vermont.

Source: 32 V.S.A. 5830e

Vermont land gains tax

Vermont taxes the seller's gain on land that was bought and subdivided within six years, at rates set by holding period and by gain as a share of basis.

Why it matters: Selling subdivided land soon after buying it can add a state tax of 5% to 80% of the gain.

Source: 32 V.S.A. 10002, 10003

Vermont IRC conformity date

Vermont adopts the federal income tax laws as of a fixed date until the legislature updates it.

Why it matters: Federal changes after that date do not apply in Vermont until adopted.

Source: 32 V.S.A. 5824

Virginia top income tax rate

Virginia taxes capital gain as ordinary income, with the 5.75% top rate starting at $17,000 of taxable income.

Why it matters: Nearly all of a large gain is taxed at 5.75%.

Source: Va. Code 58.1-320

Virginia bonus depreciation decoupling

Virginia does not follow federal bonus depreciation under IRC 168(k), (l), (m) or (n).

Why it matters: Virginia basis is higher than federal after bonus depreciation, so the Virginia gain on sale is smaller.

Source: Va. Code 58.1-301(B)(1)

Virginia Social Security subtraction

Virginia subtracts Social Security benefits included in federal adjusted gross income.

Why it matters: Extra federally taxable benefits in a sale year add no Virginia tax.

Source: Va. Code 58.1-322.02

Virginia grantor tax

Virginia imposes a grantor tax on deeds for realty sold, paid by the grantor unless the parties agree otherwise; Northern Virginia localities add a regional WMATA capital fee also paid by the grantor.

Why it matters: The seller pays 0.1% of the price, or 0.2% in Northern Virginia Transportation Authority localities.

Source: Va. Code 58.1-802, 58.1-802.3

Virginia IRC conformity date

Virginia conforms to the Internal Revenue Code as it existed on a fixed date, with listed exceptions.

Why it matters: Federal changes after that date, and the listed exceptions, do not apply in Virginia.

Source: Va. Code 58.1-301

Washington capital gains excise tax rate

Washington has no income tax but levies an excise tax on an individual's long-term capital gains above an annual deduction, with an extra 2.9% on Washington capital gains over $1,000,000.

Why it matters: A stock or business sale by a Washington resident can owe up to 9.9% on the gain.

Source: RCW 82.87.040

Washington real estate exemption and standard deduction

The Washington capital gains tax does not apply to real estate (including entity interests to the extent the gain comes from real estate the entity owns), and each filer deducts an inflation-indexed standard amount first.

Why it matters: A real estate sale owes no Washington capital gains tax at all, while a business or stock sale pays only on gain above the deduction.

Source: RCW 82.87.050; WA DOR capital gains tax page

Washington capital gains tax on installment sales

If a sale is reported on the installment method federally, the long-term gain is reported for Washington the same way, as payments are received.

Why it matters: Spreading a business sale over years can keep each year's gain under the standard deduction or below the $1,000,000 surtax line.

Source: WA DOR capital gains tax FAQ

Washington Opportunity Zone treatment

Washington computes federal net long-term capital gain as if the Opportunity Zone sections (IRC 1400Z-1 and 1400Z-2) did not exist.

Why it matters: Rolling a non-real-estate gain into an Opportunity Zone fund does not defer or exclude the Washington tax.

Source: RCW 82.87.020

Washington estate tax

Washington taxes estates above an exclusion amount at graduated rates that depend on the date of death.

Why it matters: Washington's threshold is far below the federal exemption, so many sellers' estates owe state tax.

Source: WA DOR Estate tax tables

Washington real estate excise tax (REET)

Washington taxes real property sales on a graduated state scale, usually paid by the seller, plus a local rate.

Why it matters: On a large sale most of the price falls in the 2.75% and 3% tiers, making REET one of the largest seller costs in the country.

Source: WA DOR Real estate excise tax

West Virginia top income tax rate

West Virginia taxes capital gain as ordinary income, with the top bracket starting at $60,000 for joint and single filers.

Why it matters: Almost all of a large gain is taxed at the top rate.

Source: W. Va. Code 11-21-4j

West Virginia withholding on nonresident real estate sales

The closing agent withholds 2.5% of the total payment to a nonresident seller of West Virginia real property, or 6.5% of the estimated gain instead.

Why it matters: Cash is held back at closing until the seller files a West Virginia return.

Source: W. Va. Code 11-21-71b

West Virginia Social Security subtraction

West Virginia finished phasing out its tax on Social Security: from 2026 all benefits included in federal AGI are subtracted.

Why it matters: Extra federally taxable benefits in a sale year add no West Virginia tax.

Source: W. Va. Code 11-21-12(c)(8)

West Virginia real estate transfer excise tax

West Virginia imposes an excise tax on transferring title to real estate, plus an additional county excise tax, paid by the grantor unless the grantee accepts the deed without it.

Why it matters: The seller typically pays about 0.33% of value plus a $20 fee.

Source: W. Va. Code 11-22-2

West Virginia IRC conformity date

West Virginia gives effect to federal law changes made before January 1, 2026, but not to later ones.

Why it matters: Federal changes made in 2026 or later do not apply until the legislature updates the date.

Source: W. Va. Code 11-21-9

Wisconsin top income tax rate

Wisconsin taxes the non-excluded part of capital gain at graduated rates up to 7.65%.

Why it matters: After the exclusion, a large long-term gain is taxed at about 5.4% effective.

Source: Tax Foundation 2026 brackets

Wisconsin capital gain exclusion

Wisconsin excludes 30% of net capital gain on assets held more than one year, and 60% for farm assets.

Why it matters: Long-term gain is taxed on only 70% of its amount (40% for farm assets), but depreciation recapture gets no exclusion.

Source: Wisconsin Schedule WD instructions (2025); Wis. Stat. 71.05(6)(b)9

Wisconsin capital loss carryover

Wisconsin tracks its own capital loss carryover on Schedule WD, which can differ from the federal amount, with a $3,000 annual limit against other income.

Why it matters: A Wisconsin carryover may be larger or smaller than federal, which changes how much gain is sheltered in the sale year.

Source: Wisconsin Schedule WD instructions (2025)

Wisconsin bonus depreciation

Wisconsin does not follow federal bonus depreciation.

Why it matters: Wisconsin basis is higher than federal after bonus depreciation, so the Wisconsin gain on sale is smaller.

Source: Wisconsin Form 1 instructions (2025), line 2

Wisconsin Social Security treatment

Social Security benefits are exempt from Wisconsin income tax.

Why it matters: Extra federally taxable benefits in a sale year add no Wisconsin tax.

Source: Wisconsin Form 1 instructions (2025)

Wisconsin real estate transfer fee

Wisconsin imposes a real estate transfer fee on the grantor.

Why it matters: The seller pays 0.3% of value at closing.

Source: Wis. Stat. 77.22(1)

Wisconsin IRC conformity date

Wisconsin uses federal law as amended to a fixed date, and later federal changes apply only if the legislature adopts them.

Why it matters: Many recent federal changes, including bonus depreciation, do not apply in Wisconsin.

Source: Wisconsin Form 1 instructions (2025), line 2