Advanced Tax Modeling

Real Estate Portfolio Tax Modeler

Explore illustrative sell, exchange, hold, and future QOZ scenarios using simplified assumptions. This model is not a verified determination of tax liability, exchange eligibility, or the best investment strategy.

Model limitations: Scenarios use entered flat tax rates, a 5% sale-cost assumption and a 7% discount rate, not progressive tax-return calculations. Mixed-asset §1245 exchange results and replacement depreciation are not modeled without asset allocations and actual schedules; missing results are not zero. The supported exchange funding illustration accounts for cash and net debt relief. QOF figures assume a hypothetical post-2026 investment, the applicable assumed year-five basis increase, and eligible gain excluding ordinary recapture. State QOF conformity is not assumed unless selected. Do not rely on the comparison as a verified recommendation. See IRS Form 8824 instructions and obtain a CPA's calculation.

Current Property

Gross Sale Price / Current Value

Before the model's assumed 5% selling costs

Adjusted Tax Basis

Original cost + improvements − depreciation taken

Total Accumulated Depreciation

All depreciation deducted since acquisition

§1245 Depreciation (Cost-Seg)

Personal property / land improvements depreciation only (subset of total above)

Outstanding Mortgage Balance

Loan balance to be paid off at sale

Annual NOI

Net operating income (rent minus expenses, before debt service)

Tax Profile

Federal Capital Gains Rate*

Long-term rate: 0%, 15%, or 20% based on income. Actual rate depends on total AGI & filing status.

State Capital Gains Rate*

Your state's capital gains rate (0% for TX, FL, NV, etc.). State rules vary — consult a CPA.

Investor Income Bracket*

Determines ordinary income rate for §1245 recapture. Actual rate depends on full income picture.

NIIT assumption (3.8%)

This scenario assumes NIIT applies to all modeled passive gain and rental income if selected. Actual liability uses the lesser-of/MAGI rules.

Scenario Assumptions

Hold: Annual Appreciation Rate

Expected annual appreciation if holding

Hold: Years to Model

How many years to project a hold scenario

1031 Exchange: Replacement Value

Target replacement property purchase price

1031 Exchange: New Debt on Replacement

New mortgage on replacement property

QOZ: Expected QOF Appreciation

Estimated gain from QOF appreciation (excluded after 10-yr hold per post-2026 OBBBA)

Additional model assumptions

Zero depreciation assumes no further deductions. Zero debt service assumes no payments. Hold forecasts assume these annual amounts remain constant and reduce the loan by debt service less interest; enter an actual schedule-based estimate, not an inferred purchase-price deduction.

Additional outside cash for the exchange ($)Current annual depreciation from your actual schedule ($)Annual debt service during hold ($)Annual interest portion of debt service ($)

Assume the state recognizes QOF deferral and appreciation benefits (verify separately)Assume a qualifying rural fund: 30% year-five basis increase instead of standard 10%

QOF figures are hypothetical post-2026 investments held to year five with the assumed basis increase and to year ten for appreciation. Ordinary recapture is not deferred in the QOF model. Benefits are discounted at 7%; different investment risks and cash flows prevent an automatic “best strategy” ranking.

Realized Gain / (Loss)

$825,000

Tax If Sold Today

$292,775

Effective Tax Rate

35.5%

Illustrative Comparison

Not directly comparable

📊 Gain Composition & Tax Layer Breakdown

§1245 Recapture (Ordinary)*

Rate: Up to 37%*

Tax: $22,200

§1250 Unrecaptured

Rate: 25% Max

Tax: $47,500

Pure LTCG*

Rate: 20%*

Tax: $115,000

NIIT (all passive inv. income)

Rate: 3.8%

Tax: $31,350

State Tax

Rate: 9.3%

Tax: $76,725

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Sell Now

Immediate tax recognition

Total Tax Due Now

$292,775

Net proceeds after tax & debt: $632,225

Amount Realized (after selling costs)$1,425,000

§1245 Recapture Tax (ordinary income)*$22,200

§1250 Unrecaptured Gain Tax (25%)*$47,500

Federal Long-Term Capital Gains Tax*$115,000

Net Investment Income Tax (3.8%)$31,350

State Capital Gains Tax$76,725

Mortgage Payoff$500,000

Effective Rate on Total Gain35.5%

§1245 recapture is taxed first at ordinary rates (up to 37%), then §1250 unrecaptured at up to 25%, then remaining gain at LTCG rates. Per IRC §1245(a)(1) and §1(h)(1)(E). * Federal long-term capital gains rates (0%, 15%, 20%) and short-term rates depend on your total Adjusted Gross Income (AGI), filing status, and other factors — the rate shown is an estimate only. Actual liability may differ materially. Consult a qualified CPA or tax advisor for your specific situation.

🔄

1031 Like-Kind Exchange

Into $2.0M replacement property

Deferred Gain (not tax dollars)

Not modeled

Boot tax today (if any): Not modeled — Equity redeployed: Not modeled

Equity From Sale (gross)$925,000

Boot Tax Paid on ExchangeNot modeled

Exchange Proceeds Reinvested (outside cash separate)Not modeled

Deferred §1245 RecaptureNot modeled

Deferred §1250 Unrecaptured GainNot modeled

Deferred Pure Capital GainNot modeled

Net Debt Relief After Outside Cash$0

Cash Boot (funding illustration)$0

Unfunded Purchase Amount$375,000

Replacement depreciation (schedule required)Not modeled

Substituted Basis per IRC §1031(d)Not modeled

⚠️ Exchange tax and basis are not modeled when §1245 assets are present, purchase funding is incomplete, equity is negative, or a loss requires nonrecognition/basis analysis. A CPA must allocate assets and apply the recapture rules.

For the supported single-real-property scenario, basis is replacement cost less deferred gain; expenses and asset allocations need separate review. A §1014 basis adjustment may remove embedded gain in qualifying inherited assets, but entity basis, estate inclusion, ownership and statutory exceptions matter. A step-up is not guaranteed.

⏳

Hold 5 Years

4% annual appreciation assumed

Projected Value in 5 Yrs

$1,824,979

Hold NPV at 7% discount: $710,558

Projected FMV (4%/yr × 5 yrs)$1,824,979

Future Taxable Gain (if sold at year end)$1,133,730

Future Tax Liability (at same rates)$394,965

Annual After-Tax Cash Flow$27,445

Total Cash Flows PV (5 yrs, 7% disc.)$112,530

PV of Future Net Proceeds$598,028

Simplified Equity CAGR (approx.)1.1%

Illustrative fixed-amount forecast using entered depreciation, debt service, interest, appreciation and flat tax-rate assumptions. Future sale costs are assumed to be 5% and the discount rate is 7%. Remaining loan balance is estimated from constant principal payments. Simplified equity CAGR is not an IRR; this comparison does not establish whether holding is optimal.

🏙️

Sell & Deploy to QOZ

Post-2026: original gain taxable at year 5 or earlier inclusion event

Net Tax Benefit vs Sell Now

$117,037

Deferred gain: $765,000 | PV of deferred tax: $122,928

Illustrative Eligible Gain Invested in QOF$765,000

Tax Deferred Under Entered Assumptions$191,570

Tax Not Deferred (ordinary recapture / nonconforming state)$101,205

Estimated Actual Year-5 Tax$172,413

Original Gain Recognition DeadlineYear 5 or earlier inclusion event

Present Value of Estimated Year-5 Tax$122,928

PV Benefit of Deferral and Year-5 Basis Increase$68,642

QOF Appreciation (excluded after 10-yr hold)$400,000

Tax Saved on QOF Appreciation (10-yr excl.)$95,200

PV of Assumed Year-10 Appreciation Tax Benefit$48,395

Original gain is not deferred indefinitely. This model assumes a QOF investment after December 31, 2026: original deferred gain is generally recognized at the earlier of an inclusion event or the fifth anniversary of investment. Investments made through 2026 generally have a December 31, 2026 recognition deadline. Any qualifying 10-year appreciation exclusion is separate from the tax on original gain; confirm eligibility, basis adjustments, and payment timing with your CPA.

📋 Side-by-Side Comparison

Metric	Sell Now	1031 Exchange	Hold 5 Yrs	QOZ Deploy
Tax Due Now	$292,775	Not modeled	—	$101,205
When Original Gain Is Taxed	Sale tax year	When deferred gain is recognized	Sale tax year	Year 5 or earlier inclusion event (post-2026)
Gain Deferred	—	Not modeled	—	$765,000 (temporary)
Net Equity Preserved / Deployed	$632,225	Not modeled	$925,000 (untaxed)	$823,795 (before year-five tax)
Effective Rate on Gain	35.5%	Not modeled	0% now (deferred)	See current / year-five tax
Annual Depreciation Shield	— (sold)	Not modeled	$0	—
Complexity	Low	Medium	Low	High
Liquidity	High	Medium	Low	Very Low
Estate Planning (step-up)	N/A — gain paid	Potential §1014 adjustment	Potential §1014 adjustment	Partial (QOF basis)

Opportunity-zone tax is deferred—not deferred indefinitely

For the post-2026 scenario modeled above: original deferred gain is generally included in taxable income at the earlier of an inclusion event, such as selling the qualifying QOF investment, or the fifth anniversary of the QOF investment. The tax is reported for that tax year and paid under the applicable tax-payment rules; estimated payments may be required before the return is due.

For investments made through December 31, 2026: original deferred gain is generally recognized at the earlier of an inclusion event or December 31, 2026. For a calendar-year individual, December 31, 2026 inclusion generally means reporting the gain on the 2026 return filed in 2027—not another five years of deferral.

The 10-year benefit is separate: a qualifying election may exclude eligible appreciation on the QOF investment; it does not eliminate the tax on the original deferred gain. Plan for that tax even if you continue holding the fund. The post-2026 year-five basis increase is generally 10%, or 30% for a qualifying rural opportunity fund, if the conditions are met. The later regime's appreciation rule has a 30-year limit; it is not an unlimited exclusion of every future gain. The model uses those entered assumptions and separately identifies tax not deferred. Present value is discounted, not the actual payment; state conformity and eligibility must be verified.

Sources: IRS opportunity-zone FAQs (original program) and IRS Notice 2026-40 (transition rules) and Public Law 119-21. Confirm your dates and payment obligations with your CPA.

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AI Tax Strategy Analysis

AI-generated educational analysis — verify sources, assumptions, and current law with a qualified professional

Request an AI-generated discussion of the entered assumptions, missing facts, recapture rules and questions for your advisors. It does not verify these inputs or identify a guaranteed optimal strategy.

⚠️ Educational Tool Only. All calculations are estimates based on your inputs and simplified assumptions. They do not account for your complete tax situation, AMT, state-specific nuances, or all applicable limitations. Always consult a qualified CPA, tax attorney, and licensed Qualified Intermediary before making any transaction decisions. See full Legal Disclaimer.

* Fields marked with an asterisk involve rates that depend on your total Adjusted Gross Income (AGI), filing status, NIIT exposure, and other individual factors. Federal long-term capital gains rates (0%, 15%, 20%) and short-term rates may differ materially from the values entered. For qualifying investments after December 31, 2026 under Public Law 119-21, original-gain recognition is generally at year five or an earlier inclusion event, with applicable basis adjustments. Qualifying appreciation benefits require a separate election and conditions and are subject to the later regime's 30-year limit; state treatment can differ. Consult a qualified CPA or tax advisor for your specific situation.