To calculate your after-tax future wealth from real estate, you must account for annual cash flow, property appreciation, and the tax liabilities triggered upon a future sale. 1. Project Future Pre-Tax Value
: The remaining profit is taxed at long-term capital gains rates—typically 0%, 15%, or 20% depending on your income level—if held for over a year .
: The IRS "recaptures" the tax benefits you took during ownership. This is often taxed at a flat rate of up to 25% .
: High-income earners may owe an additional 3.8% . 4. Final Wealth Calculation
Three primary taxes typically impact your final wealth at the time of sale: