A California rental sale can carry four different taxes at once, capital gains, depreciation recapture, the 3.8% NIIT, and California's 13.3% rate. Here's how to legally defer and soften each one.
Selling a California rental property is rarely the clean capital gain owners expect. Four separate taxes can land on the same sale, and California is the highest-tax state in the country. Here's the full picture, and how to keep more of it.
Send me the sale price and rough basis and I'll email you the actual number within one business day — plus the Seller's Guide to §453. If it doesn't fit your deal, I'll tell you that plainly.
No retainer · no obligation · the carrier compensates the broker, not you.
If you want to keep owning real estate, a 1031 may fit. If you want out, or can't find a replacement, a structured installment sale spreads the capital-gain portion across years and gives you guaranteed income. Either way, the move is to plan before you list.
You can defer it with a 1031 exchange (requires buying a replacement property) or a structured installment sale under IRC §453 (spreads the gain over years with no replacement needed). California taxes the gain as ordinary income up to 13.3%, so deferral is especially valuable.
Yes. The depreciation you deducted over the years is recaptured at sale, the straight-line portion is unrecaptured §1250 gain, taxed up to 25% federally. California taxes it as ordinary income with no 25% cap.
Generally no, recapture is recognized in the year of sale even under the installment method. A structured installment sale mainly spreads the capital-gain portion of the sale, so the recapture should be planned for separately.
A 1031 defers tax only if you reinvest in another like-kind property within strict deadlines. A structured installment sale spreads the gain over years without buying anything, better if you want to exit real estate entirely.
Potentially four layers: up to 20% federal capital gains, up to 25% recapture on prior depreciation, the 3.8% NIIT, and California ordinary tax up to 13.3%. The combined bite can approach or exceed a third of the gain, which is why deferral planning matters.
Before you sign anything, run your numbers with someone who structures the deal to be tax-smart and audit-ready from day one.
Call 213-340-2018 Run the Numbers →
Send me the sale price and roughly what you paid. Within one business day I’ll come back with the number you’re actually looking at on a California property sale, and whether a structured installment sale can push it down — or whether it can’t, which I’ll tell you just as plainly.
Drop your info — instant PDF download + within 1 business day Hans will email a preliminary read on which structure fits your deal. No retainer. Carrier compensates the broker — not you.
📞 Hans Goldstein · 213-340-2018 · CA Insurance License #4322192 · Independent §453 specialist · Goldstein & Co. LLC
