What your result means
Your gain is the sale price, less selling costs, less your adjusted basis, which is what you paid plus capital improvements minus any depreciation you claimed while it was a rental. If you owned the home a year or less, the whole gain is short-term and taxed at your ordinary federal income tax rates. If you owned it more than a year, the gain is long-term: if the home was never your main residence, it is taxable at 0/15/20% long-term capital gains rates, plus a special rate up to 25% on the portion equal to depreciation claimed (called unrecaptured Section 1250 gain, taxed at your ordinary rate but capped at 25%), plus a possible 3.8% Net Investment Income Tax (NIIT) surtax if your income is above the threshold. If the property was your main home for at least two of the five years before the sale, part of the gain can be excluded under Section 121, up to $250,000 single or $500,000 married filing jointly. A "nonqualified use" rule strips out the portion of the exclusion attributable to years the home was a second home or rental rather than your main residence, but only for years that came before the main-home years; a period after the last date the property was your main home is not nonqualified use, even if that period runs right up to the sale, which is why the calculator asks when the main-home years happened.
Worked example
Take a lake house in Michigan bought for $400,000 with $30,000 of capital improvements, sold ten years later for $750,000 with $35,000 in selling costs, and never used as a main home. The adjusted basis is $430,000, net proceeds are $715,000, and the gain is $285,000. With no depreciation claimed, none of it is unrecaptured Section 1250 gain, and with no years as a main home, none of it qualifies for the Section 121 exclusion, so the full $285,000 is taxed as long-term capital gain. Stacked on top of $150,000 of other taxable income for a married couple filing jointly, most of that gain falls in the 15% bracket, producing an illustrative federal tax of roughly $49,780 including capital gains tax and the Net Investment Income Tax surtax, before any state tax.
A second worked example shows why the timing question matters. A single filer bought a condo for a total gain of $200,000, owned it 5 years, used it as a main home for the first 2 and rented it out for the final 3 right up to the sale, with no depreciation claimed. Because the rental years came after the last date it was a main home, none of them count as nonqualified use under the trailing-period exception, so the entire gain qualifies for the Section 121 exclusion (well inside the $250,000 single cap) and the estimated federal tax is $0. If instead those same 3 rental years had come first, before the owner ever moved in, 3 of the 5 years owned (60%) would count as nonqualified use, only 40% of the gain would be exclusion-eligible, and there would be a real tax bill on the rest.
How this is calculated
owned 1 year or less: entire gain taxed as ordinary income at your marginal rate
owned more than 1 year: nonqualified_use_ratio = 0 if the non-main-home years came after the last main-home year, else nonqualified_years / years_owned
excluded = min(section_121_cap, gain_above_depreciation x (1 - nonqualified_use_ratio))
taxable_gain = gain_above_depreciation - excluded, taxed at 0/15/20%
unrecaptured_1250 = min(depreciation, gain), taxed at your ordinary rate but capped at 25%, stacked before the 0/15/20% gain
NIIT = 3.8% x min(net_investment_income, MAGI - threshold)
| Filing status | 0% up to | 15% from / to | 20% above |
|---|---|---|---|
| Single | $49,450 | $49,450-$545,500 | $545,500 |
| Married filing jointly | $98,900 | $98,900-$613,700 | $613,700 |
| Head of household | $66,200 | $66,200-$579,600 | $579,600 |
NIIT applies a 3.8% surtax on the lesser of net investment income or the amount your modified adjusted gross income exceeds $200,000 (single or head of household) or $250,000 (married filing jointly), fixed thresholds unchanged since 2013. A short-term gain (owned a year or less) and unrecaptured Section 1250 gain are taxed using the 2026 ordinary federal income tax brackets (10/12/22/24/32/35/37%), confirmed directly against the IRS's own 2026 inflation-adjustment announcement for single and married filing jointly, and cross-checked against Tax Foundation's published table for head of household. Sources: IRS Revenue Procedure 2025-32 (2026 inflation adjustments) and the IRS's 2026 inflation adjustments announcement; IRS Publication 523, Selling Your Home, for Section 121 and the nonqualified use rule, including the trailing-period and pre-2009 exceptions; IRS Publication 946 for the 27.5-year depreciation period; IRS Form 8960 instructions and Schedule D instructions (Unrecaptured Section 1250 Gain Worksheet) for NIIT and the 25% cap.
What this calculator does not cover
Married filing separately is left out entirely because its 2026 long-term capital gains threshold was not independently confirmed against the primary IRS revenue procedure at the time this page was built; do not use single or joint figures as a substitute for an MFS return without checking directly. This calculator does not model a 1031 like-kind exchange, which is not available for a home used purely as a personal second home and requires meeting the Rev. Proc. 2008-16 safe harbor on rental days and personal-use limits if the property had mixed use. It does not calculate state capital gains tax, the exact 5-year lookback window for the Section 121 test, or depreciation recapture beyond straight-line residential rental property. It only supports one switch between main-home use and second-home or rental use (either at the start of ownership or at the end); it cannot model moving in, moving out, and moving back in more than once. It also cannot exclude nonqualified use from before 2009, since it works from years owned rather than exact calendar dates; if any of your ownership predates 2009, treat the nonqualified-use portion of your result as an overestimate and check with a preparer. Ordinary income tax brackets used for a short-term sale (under a year) and for capping unrecaptured Section 1250 gain at 25% are the 2026 brackets for single, married filing jointly and head of household only; the head of household figures are cross-checked against a secondary source rather than fetched directly from an IRS publication. See selling a second home: taxes for the fuller picture, or our vacation home tax rules guide if you have not sold yet.
Questions
Can I use the Section 121 exclusion on a second home?
Only for the portion of time it was your main home. If you owned and used it as your principal residence for at least two of the five years before the sale, part of the gain can be excluded, but the nonqualified use rule strips out the fraction of the exclusion attributable to second-home or rental years that came before you used it as your main home. A period after the last date it was your main home does not count as nonqualified use, even if that period runs right up to the sale, which is why the calculator asks when your main-home years happened.
What is unrecaptured Section 1250 gain?
It is the portion of your long-term gain equal to the depreciation you claimed while the property was a rental. It is taxed at your ordinary federal income tax rate, but never above a maximum of 25%, and it is never eligible for the Section 121 exclusion even on an otherwise qualifying home.
What if I owned the home for less than a year?
Then the whole gain is short-term, not long-term, and is taxed at your ordinary federal income tax rate instead of the 0/15/20% long-term capital gains rates. The Section 121 exclusion cannot apply either, since it requires at least two years of ownership and use as a main home.
Does the Net Investment Income Tax always apply?
No. It only applies once your modified adjusted gross income, including the gain from this sale, exceeds $200,000 (single or head of household) or $250,000 (married filing jointly), and then only on the lesser of your net investment income or the amount over that threshold.
Can I do a 1031 exchange on a vacation home?
Not if it is used purely as a personal second home. A 1031 exchange requires the property be held for investment or business use; a mixed-use vacation property can sometimes qualify under the Rev. Proc. 2008-16 safe harbor if it was rented at fair market rent for at least 14 days a year and personal use stayed under the greater of 14 days or 10% of rented days, in each of the two years before and after the exchange.
Why does the calculator ask for other taxable income?
Long-term capital gains are stacked on top of your ordinary taxable income to determine which bracket, 0%, 15% or 20%, the gain falls into. Without your other income, the calculator cannot tell how much of the gain lands in each bracket.
Last reviewed 15 September 2026 against IRS Revenue Procedure 2025-32, Publication 523, Publication 946 and Form 8960 instructions. Next review with the 2027 inflation adjustments.
This calculator gives a general estimate from the figures you enter. It is not financial, tax, legal or mortgage advice. Rules change and personal circumstances matter, so confirm with a qualified professional before you act. See the full disclaimer.