Business Sale Tax Calculator: Asset Sale vs Stock Sale (2026)
What you owe when you sell your business, and what you keep: asset sale against stock sale, your purchase price allocation, C corporation double tax, the 3.8% net investment income tax and your state, then what spreading the payments keeps you.
By Hans Goldstein, EA · Updated October 13, 2026
Your result
S corporation asset sale. You keep $3,959,490 after selling costs and tax.
Where your gain lands
Asset sale vs stock sale
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How this business sale tax calculator works
Enter the price, how the business is held, and how the buyer proposes to split the price. The calculator sorts every dollar into the bucket the tax code puts it in, then prices each bucket with the 2026 federal brackets from IRS Rev. Proc. 2025-32 (published October 2025), the alternative minimum tax, the 3.8% net investment income tax and the state you choose. It runs on the same tax engine as the rest of the calculators on this site.
| Part of the price | How it is taxed | Source |
|---|---|---|
| Inventory and receivables | Ordinary income, up to 37% | IRC §1221(a)(1), (a)(4) |
| Equipment, up to the depreciation taken | Ordinary income (recapture), up to 37% | IRC §1245 |
| Building, up to the depreciation taken | Unrecaptured Section 1250 gain, up to 25% | IRC §1(h)(6) |
| Goodwill and the rest of the gain | Long-term capital gain: 0%, 15%, 20% | IRC §1231, IRC §1(h) |
| Non-compete paid to you | Ordinary income | IRC §61 |
| C corporation's own gain (asset sale) | 21% at the corporation, then capital gain to you when it pays out | IRC §11(b), IRC §331 |
| All of the above, if you do not work in the business, or C corporation stock | Plus 3.8% net investment income tax over $250,000 (joint) / $200,000 (single) | IRC §1411 |
Worked example: a $6 million S corporation sale in California (2026)
A married couple sells their S corporation for $6,000,000 with 5% selling costs. They work in the business, have $250,000 of other income and live in California. The buyer proposes an asset sale: $300,000 for inventory and receivables (at their $300,000 basis), $500,000 for equipment that cost $900,000 and has been depreciated by $700,000, and the remaining $5,200,000 for goodwill they built themselves. Their stock basis is $800,000.
| Computed October 13, 2026 | Asset sale | Stock sale |
|---|---|---|
| Ordinary income (recapture, inventory) | $260,000 | $0 |
| Long-term capital gain | $4,940,000 | $4,900,000 |
| Federal income tax (incl. AMT) | $1,081,647 | $987,847 |
| Net investment income tax | $0 | $0 |
| California tax | $658,863 | $618,963 |
| Total tax | $1,740,510 | $1,606,810 |
| You keep | $3,959,490 | $4,093,190 |
The asset sale costs them $133,700 more, mostly because $260,000 of equipment recapture and inventory is ordinary income and California taxes every dollar as ordinary income. No net investment income tax applies either way because they materially participate. Spread over 10 years as an installment sale, the same asset sale costs $1,365,820 in tax including $7,887 of Section 453A interest charge: they keep $374,690 more. The note's interest is extra income and is left out to isolate the gain.
If the same business were a C corporation (stock basis $800,000, 8.84% California corporate tax), the asset sale would cost $2,708,298 in total, including $995,467 of federal corporate tax, against $1,793,010 for a stock sale. That gap is the double tax, and it is why C corporation owners push hard for a stock sale or for personal goodwill where the facts support it.
Asset sale or stock sale: who wants which
Buyers prefer assets: they get a new depreciable basis and leave unknown liabilities behind. Sellers prefer stock: one capital gain, and no corporate tax for a C corporation. The difference in your tax is a number you can put on the table. If the buyer insists on assets, ask for a higher price or a better allocation, and price the gap here first. More on the trade-offs: asset sale vs stock sale and selling a C corporation. For a California seller, see capital gains tax on selling a business in California.
When the buyer pays over time
Seller financing, an earn-out or a structured installment sale all spread the gain over the years you are paid (IRC 453). The ordinary-income parts (recapture and inventory) are still taxed in the year of sale (IRC §453(i), (b)(2)), so the cash at closing should cover that tax. See a structured installment sale for a business and the structured installment sale calculator.
What this calculator leaves out
It assumes every asset was held more than one year, a C corporation has no other assets or debts when it liquidates, and goodwill you bought earlier has no amortization to recapture. It does not model the S corporation built-in gains tax (IRC 1374), a Section 338(h)(10) or 336(e) election, state corporate apportionment, local taxes, or a C corporation's qualified small business stock exclusion: for that, use the QSBS calculator.
Business sale tax questions
How is the sale of a business taxed?
It depends on what is sold. In an asset sale each asset is taxed on its own: inventory, receivables, equipment depreciation (Section 1245 recapture) and a non-compete are ordinary income, building depreciation is taxed at up to 25%, and goodwill is long-term capital gain at 0%, 15% or 20%. In a stock sale of an S corporation or C corporation the owner usually has one long-term capital gain. The 3.8% net investment income tax and your state tax can apply on top.
Is an asset sale or a stock sale better for the seller?
Usually a stock sale, because the whole gain is capital gain and a C corporation avoids its own 21% tax. Buyers usually prefer an asset sale because they get a stepped-up basis to depreciate. The calculator shows both side by side so you can see what the difference is worth before you negotiate the price and the allocation.
What is the tax rate on selling a business in 2026?
Federal long-term capital gain is taxed at 0%, 15% or 20%; the 20% rate starts at $613,700 of taxable income for a married couple filing jointly and $545,500 for a single filer in 2026 (IRS Rev. Proc. 2025-32). Ordinary income parts reach 37%. Add 3.8% net investment income tax unless you materially participate in an S corporation, partnership or sole proprietorship, plus your state.
Do I pay the 3.8% net investment income tax when I sell my business?
Not on gain from a business you actively run through an S corporation, a partnership or LLC, or as a sole proprietor: IRC 1411(c)(4) and the regulations treat that gain as non-investment income. Gain on C corporation stock, and gain from a business you only invested in, is net investment income.
Can I spread the tax on a business sale over several years?
Yes. An installment sale under IRC 453 taxes the gain as payments arrive, so less of it lands in the top brackets. Depreciation recapture and inventory are still taxed in the year of sale, and notes over $5,000,000 can carry an interest charge under IRC 453A. The calculator shows what spreading keeps you on your numbers.
How does purchase price allocation affect my taxes?
Buyer and seller split the price across seven asset classes on IRS Form 8594. Every dollar moved from goodwill to equipment, inventory or a non-compete turns lower-taxed capital gain into ordinary income for you. Use the allocation boxes to test the buyer's proposal before you agree to it.
Sources
- IRS Rev. Proc. 2025-32, 2026 tax rate schedules and capital gain breakpoints (October 2025): irs.gov
- IRS Form 8594, Asset Acquisition Statement, and instructions (rev. November 2021): irs.gov
- IRS Publication 544, Sales and Other Dispositions of Assets (2025): irs.gov
- IRC 1(h), 11(b), 331, 453, 453A, 751, 1221, 1231, 1245, 1250, 1411 (read October 13, 2026): Cornell LII
- Net investment income tax, Treas. Reg. 1.1411-4 and IRS questions and answers: irs.gov
Related: asset sale vs stock sale · C corporation sale tax · structured sale of a business · QSBS calculator · depreciation recapture calculator · all calculators · structured sale calculators
Educational estimate only, not tax, legal or investment advice. Figures use 2026 federal law (Rev. Proc. 2025-32), the alternative minimum tax, the 3.8% net investment income tax and the state you choose, held flat for later years. Your CPA should confirm any number before you act. Hans Goldstein, EA.