Skip to calculator
themoneysheet logothemoneysheet

Capital Gains on Business Sale Calculator

Estimate the federal tax on selling your business — asset vs stock sale, depreciation recapture, and the post-OBBBA QSBS exclusion that can wipe out tax on up to $15M of gain.

Written by Dorothy Ibrahim, 10+ years in banking & finance

Loading calculator…

How we calculate this

This calculator estimates the federal tax on selling your business, splitting the gain into its real buckets: §1245 depreciation recapture taxed as ordinary income, unrecaptured §1250 gain on real property taxed at up to 25%, and the remainder (including goodwill) at long-term capital gains rates, plus the 3.8% net investment income tax. If the business was held one year or less the gain is short-term and taxed at ordinary rates instead. For C-corporation stock sales it applies the §1202 QSBS exclusion under both the current and prior rules — the post-OBBBA tiers of 50%/75%/100% at 3/4/5 years (up to $15M) for stock issued after July 4, 2025, and the prior-law 100% exclusion at 5 years (up to $10M) for stock acquired on or before that date — a break most competitor tools still miss. It is an educational federal estimate, not tax advice.

The formulas
Total gain
sale price − (original basis − accumulated depreciation)Adjusted basis is floored at zero. A price at or below adjusted basis produces a capital loss and no gain tax.
§1245 ordinary recapture (asset sale)
the smaller of accumulated depreciation or the gain allocated to equipment — taxed at ordinary income rates
Unrecaptured §1250 gain (asset sale)
the smaller of remaining depreciation or the gain allocated to real property — taxed at 25%The statute caps this at the lesser of 25% or your ordinary rate; the tool uses the 25% ceiling.
Long-term capital gains tax
remaining gain (including goodwill) stacked on top of other income through the 0% / 15% / 20% brackets
QSBS exclusion (qualifying C-corp stock sale)
stock issued after July 4, 2025: gain up to the $15M per-issuer cap × exclusion tier (50% at 3 years, 75% at 4, 100% at 5). Stock acquired on or before July 4, 2025: 100% of gain up to the prior $10M per-issuer cap, but only at a full 5-year hold (no 3/4-year tiers).Requires C-corp stock and corporate gross assets under the size cap ($75M post-OBBBA; $50M under prior law). Asset sales get no QSBS benefit.
Short-term gain (held one year or less)
the §1250 and remaining-gain buckets are taxed at ordinary income rates instead of the 25% / 0-15-20% preferential rates; §1245 recapture is ordinary either way
Net investment income tax (NIIT)
3.8% × the capital-gain portion, to the extent modified AGI exceeds the threshold ($250,000 married filing jointly; $200,000 single)
Total federal tax and after-tax proceeds
recapture tax + §1250 tax + capital gains tax + NIIT; after-tax proceeds = sale price − total tax
Worked example
  1. Say an asset sale for $1,200,000 with $300,000 of original basis and $150,000 of accumulated depreciation, gain allocated 30% to equipment / 20% to real property / 50% to goodwill, married filing jointly with $200,000 of other taxable income, tax year 2026.
  2. Adjusted basis = $300,000 − $150,000 = $150,000, so the total gain is $1,200,000 − $150,000 = $1,050,000.
  3. Gain by bucket: equipment $315,000, real property $210,000, goodwill $525,000. §1245 recapture = the smaller of $150,000 depreciation or $315,000 equipment gain = $150,000, taxed as ordinary income. All depreciation is absorbed there, so the unrecaptured §1250 bucket is $0.
  4. The remaining $900,000 is long-term capital gain. Stacking $150,000 of recapture on $200,000 of other income adds $35,772 of ordinary tax (2026 married-filing-jointly brackets).
  5. The $900,000 of LTCG stacks from $350,000 up: $263,700 falls in the 15% band (up to the $613,700 breakpoint) = $39,555, and $636,300 falls in the 20% band = $127,260 — $166,815 of capital gains tax.
  6. NIIT: modified AGI of $1,250,000 exceeds the $250,000 threshold by $1,000,000, so the full $900,000 capital-gain portion is hit at 3.8% = $34,200.
  7. Total federal tax = $35,772 + $166,815 + $34,200 = $236,787 — about 22.6% of the gain — leaving after-tax proceeds of $963,213 (before selling costs; see the Net Sale Proceeds calculator).
Rates, benchmarks & sources
  • Depreciation recapture: §1245 gain (equipment) taxed as ordinary income up to accumulated depreciation; unrecaptured §1250 gain (real property) taxed at up to 25% (IRC §1(h)(1)(E)). — IRC §1245 and §1250
  • 2026 federal ordinary income tax brackets used for the recapture tax. The 2026 long-term capital gains breakpoints (e.g. $98,900 / $613,700 married filing jointly) are the configured values, to be verified against Rev. Proc. 2025-32 before publish. — IRS Rev. Proc. 2025-32 (brackets made permanent by OBBBA)
  • 3.8% net investment income tax above modified-AGI thresholds of $250,000 (married filing jointly), $200,000 (single/head of household), $125,000 (married filing separately). — IRC §1411
  • QSBS tiered exclusion of 50%/75%/100% at 3/4/5 years for stock issued after July 4, 2025; per-issuer cap $15,000,000 (indexed after 2026); gross-asset test $75,000,000. C-corp stock only. — IRC §1202 as expanded by OBBBA
  • For QSBS acquired on or before July 4, 2025 (after Sept 27, 2010): 100% exclusion at a 5-year holding period, per-issuer cap the greater of $10,000,000 or 10× the stock’s adjusted basis (the 10×-basis alternative is not modeled here), gross-asset test $50,000,000. No 3/4-year partial tiers under prior law. — IRC §1202(b)(1) (prior law)
  • Preferential capital-gains rates apply only to gain on property held more than one year; property held one year or less is short-term and taxed at ordinary income rates. — IRC §1222 / §1(h)

Figures current as of 2026-07-02. See our methodology & editorial standards for how constants are versioned and verified.

What this tool doesn’t model
  • Federal only — state income tax on the sale varies from zero to double digits and is not modeled; state QSBS conformity also varies.
  • Uses a single shared depreciation pool split across the equipment and real-property buckets; precise recapture requires per-asset depreciation schedules from your fixed-asset records.
  • Unrecaptured §1250 gain is taxed at a flat 25% here; the actual rule is the lesser of 25% or your ordinary rate, so lower-bracket sellers may see a slightly lower bill.
  • For QSBS sales at the 50% and 75% tiers, the taxable portion technically carries a special 28% §1202 rate plus AMT preference in some cases; this tool taxes the non-excluded gain at regular LTCG rates instead.
  • The prior-law QSBS path (stock acquired on or before July 4, 2025) uses the $10M per-issuer cap but reuses the $75M gross-asset gate as a proxy for the lower $50M prior-law size test, and does not model the 10×-basis cap alternative or the reduced 50%/75% exclusion percentages for stock acquired before Sept 28, 2010 — confirm QSBS eligibility and the exact cap with a CPA.
  • Long-term treatment is applied when the holding period is one year or more; the precise statutory rule is more than one year, so a sale at exactly one year is short-term (ordinary) — set the holding period accordingly.
  • Does not model installment sales (§453), the corporate-level tax in a C-corp asset sale, §338(h)(10) elections, or purchase-price allocation negotiation — all of which materially change real outcomes.

Frequently asked questions

What exactly does this estimate include — and what does it leave out?

It estimates federal tax only: §1245 ordinary recapture, unrecaptured §1250 gain at 25%, long-term capital gains at the 0/15/20% brackets, NIIT at 3.8%, and the QSBS exclusion where the eligibility toggles apply. It leaves out state income tax, installment-sale treatment, corporate-level tax in C-corp asset sales, and the actual purchase-price allocation you will negotiate. It is an educational estimate — a sale this size warrants a CPA and an M&A attorney before anything is signed.

Why is part of my gain taxed as ordinary income instead of capital gains?

That is depreciation recapture. Every dollar of depreciation you deducted against ordinary income reduced your basis, and §1245 claws it back at ordinary rates when the equipment sells for more than its depreciated value — in the default example, $150,000 of the gain. The write-offs were a deferral, not a freebie. Gain on real property attributable to depreciation gets its own bucket, unrecaptured §1250 gain, taxed at up to 25%.

What is QSBS and why does it matter so much?

Qualified Small Business Stock under §1202 lets sellers of eligible C-corporation stock exclude gain from federal tax entirely. As expanded by the OBBBA for stock issued after July 4, 2025, the exclusion is tiered — 50% at 3 years, 75% at 4, 100% at 5 — on up to $15M of gain per issuer, with the gross-asset test raised to $75M. Stock acquired on or before July 4, 2025 is not shut out: it still qualifies under prior §1202 law, which gives a 100% exclusion at a full 5-year hold (no 3/4-year partial tiers) capped at the greater of $10M or 10× your basis, with a $50M gross-asset test. At 5+ years either version can wipe out federal tax on the whole gain. But it applies to C-corp STOCK sales only: asset sales and pass-through entities get no QSBS benefit, and most small-business sales are asset sales.

Should I structure my sale as an asset sale or a stock sale?

This is the classic negotiation: buyers prefer asset sales because they get a stepped-up basis to depreciate, while sellers often prefer stock sales because there is no recapture, everything is capital gain, and QSBS may apply. The tax difference can be six figures on the same price, which is why the structure is priced into the deal itself. This tool lets you compare both scenarios, but the choice has legal and liability dimensions beyond tax — get a CPA and an M&A attorney involved early.

What if I sell for less than what I put into the business?

If the sale price is at or below your adjusted basis (original basis minus accumulated depreciation), there is no gain and no gain tax — you have a capital loss instead. Note that depreciation lowers your basis, so a business can sell for less than you originally paid and still show a taxable gain. Capital losses can generally offset other capital gains, with limits on offsetting ordinary income (§1211–1212); how much helps in your situation is a question for your CPA.

How is the tax on the capital gain actually calculated?

Long-term capital gains stack on top of your ordinary income and fill the 0%, 15%, and 20% brackets in order — for 2026, married-filing-jointly gain is at 0% up to $98,900 of taxable income, 15% up to $613,700, and 20% above that (configured values, verified against Rev. Proc. 2025-32 before publish). A big sale pushes most of the gain into the 20% band, and the 3.8% NIIT applies on top once modified AGI clears $250,000 (joint), making the practical top federal rate on the gain 23.8%.

Related calculators

themoneysheet provides educational estimates, not financial, tax, or legal advice. Figures use published rates and formulas current as of the date shown, but your situation may differ. Consult a qualified professional (CPA, attorney, or licensed advisor) before making financial decisions.