Real Estate Tax Calculator

Market value is what a property would sell for between a willing buyer and seller in an arms-length transaction. Assessed value is the value assigned by the local tax assessor's office for property tax purposes. In most jurisdictions, assessed value is either equal to market value (100% assessment ratio) or a set fraction of market value (e.g., 60% or 80% of market value — called the assessment ratio). The actual tax rate (mill rate) is then applied to the assessed value. If your property is assessed at a ratio higher than comparable properties (over-assessed), you may be paying more than your fair share and a tax appeal is warranted. Assessment methodologies vary significantly by state and county.

Depreciation allows rental property owners to deduct the cost of the building (not land, which does not wear out) over its useful life — 27.5 years for residential rental property and 39 years for commercial property — using straight-line depreciation. The annual deduction equals the building's cost basis divided by 27.5 or 39. This is a non-cash deduction — you do not actually spend this money — but it reduces your taxable rental income on paper. The deduction is valuable because it can create a paper loss even when the property generates positive cash flow. The tradeoff: accumulated depreciation reduces your cost basis and must eventually be recaptured (taxed at up to 25%) when the property is sold, unless deferred through a 1031 exchange.

Cost segregation is an IRS-compliant engineering study that reclassifies components of a building from 27.5-year or 39-year property into shorter depreciation lives of 5, 7, or 15 years. Personal property components (appliances, carpeting, specialty wiring) are depreciated over 5-7 years; land improvements (parking lots, landscaping, fences) over 15 years. The accelerated depreciation front-loads deductions into the early years of ownership, creating larger tax losses sooner. Combined with bonus depreciation (100% first-year deduction for qualifying property, phasing down after 2022), cost segregation can generate massive first-year deductions. It is most beneficial for properties with significant improvements, higher-income investors, and those with passive income to shelter.

Under IRC Section 469, passive activity losses (including rental losses) can generally only offset passive income. However, a special allowance permits up to $25,000 in rental losses to offset ordinary income for investors who actively participate in rental management (make decisions about tenant selection, leases, repairs, etc.) and whose modified AGI is $100,000 or below. This allowance phases out by $1 for every $2 of AGI above $100,000, disappearing entirely at $150,000 AGI. Investors above the phase-out threshold must carry their disallowed losses forward to offset future rental income or gains from the sale. Real estate professionals (750+ hours of real estate activity) can deduct unlimited rental losses against ordinary income.

To appeal your property tax assessment: (1) Review your assessment notice for the appeal deadline — typically 30-90 days from the assessment date; (2) Research comparable sales in your neighborhood (use Zillow, Redfin, or the assessor's own database) for properties similar in size, age, and condition that sold below your assessed value; (3) Request the assessor's property record card to verify the data used (square footage, bedroom count, condition rating) — errors are common and correctable; (4) File a formal appeal with the local Board of Assessment Review or Equalization, including your comparables; (5) Attend the hearing and present your evidence calmly and factually. If denied at the local level, many jurisdictions allow appeal to a state-level review board or tax court.

Real estate transfer taxes are imposed by states, counties, and municipalities when property changes hands, typically calculated as a percentage of the sale price or a flat dollar amount per $500/$1,000 of value. Rates vary enormously: no transfer tax in Texas, Alaska, or Idaho; 0.1% in Colorado; 0.5% in California; 1.0-1.5% in New York State; 2.0-2.5% in some NYC transactions; and rates up to 3-4% in parts of Vermont and DC. Seller's closing costs also include: real estate agent commissions (5-6%), title insurance (0.5-1.0%), escrow fees ($500-1,500), recording fees ($50-250), and any outstanding liens or property tax proration. Total selling costs typically run 7-10% of the sale price.

Yes — several strategies can reduce or defer capital gains tax: (1) 1031 Exchange: defer all capital gains and depreciation recapture by reinvesting proceeds into a like-kind replacement property within 180 days; (2) Primary Residence Exclusion (Section 121): exclude up to $250,000/$500,000 in gains by meeting the 2-of-5-year residency requirement; (3) Installment Sale: spread the gain over multiple years by receiving payments over time rather than a lump sum, potentially keeping you in a lower tax bracket each year; (4) Opportunity Zone Investment: invest gains in a Qualified Opportunity Zone fund to defer and potentially reduce the original gain and eliminate gains on the new investment if held 10+ years; (5) Charitable Remainder Trust: donate appreciated property to a CRT, receive an income stream, and avoid immediate capital gains tax while receiving a charitable deduction.