EZ Sell Homebuyers
Free Ohio Landlord Tool

Should I Sell My Ohio Rental — Or Keep Holding?

See exactly what you'd net under four exit paths — sell retail, sell to a cash buyer with tenants in place, hold for more years, or roll the proceeds into a 1031 like-kind exchange. Includes the 25% federal depreciation recapture tax most Ohio landlords don't know they owe.

Built by Mike Wall, licensed Ohio REALTOR® (#2001023573) — applies 27.5-year SL depreciation under IRC § 168(c), unrecaptured § 1250 gain at the 25% federal max under IRC § 1(h)(1)(E), federal LTCG (0/15/20%), the 3.8% NIIT under IRC § 1411, and Ohio's 3.5% top rate under HB 33.

Property & Tax Inputs

About the property

What the property would sell for retail today, fully repaired, listed on the MLS. Pull a recent sold comp or get a free CMA.

Roof, HVAC, kitchen remodel, additions, etc. Adds dollar-for-dollar to your basis. Repairs (paint, faucets) do NOT count.

Only the BUILDING is depreciable, not the land. Default 20%; check your county auditor's tax-record split for an accurate number.

Income side (for cap rate & hold scenario)

Property tax + insurance + repairs + maintenance + management + owner-paid utilities. EXCLUDES mortgage payments and depreciation.

Hold-period projection
Sale scenarios

Cash investor offers typically run 65–80% of ARV minus repair costs. For a quick estimate, try (FMV × 0.75) − repair budget.

P&I + utilities + lawn while vacant.

Tax inputs

15% covers most middle-class W-2 landlords. Pick 20% only if your taxable income exceeds ~$533K single / $600K MFJ.

NIIT applies if MAGI > $200K single / $250K MFJ. Ohio top rate: 3.5%.

Your three exit paths, side-by-side
Sell retail (4–6 mo)
$80,546
Sell cash (7–21 days)
$59,081
Hold 10 more yrs
$150,798
nominal $, not inflation-adjusted

Hold figure = cumulative 10-year cash flow ($29,202) + future sale net at year 10 ($121,597). Future sale assumes mortgage balance unchanged and same tax inputs.

Current rental performance (snapshot)

Cap rate
5.76%
NOI ÷ FMV
Annual NOI
$10,084
$16,284 rent − $6,200 opex
Annual cash flow
$1,444
NOI − annual P&I
Cash-on-cash
1.23%
vs $117,000 equity

Sell scenarios — line-by-line tax breakdown

Sell retail (MLS listing)
$80,546
Sale price$175,000
− Selling costs (8%)− $14,000
− Mortgage payoff− $58,000
− Federal § 1250 recapture (25%)− $7,600
− Federal LTCG (15%)− $8,100
− Ohio income tax (3.5%)− $2,954
− Carrying (4 mo × $950)− $3,800
4–6 month timeline. Tenant must vacate (or you sell to another investor at a discount). Property must show well — repairs likely required.
Sell cash (as-is, tenants in place)
$59,081
Cash offer$130,000
− Selling costs$0 (cash buyer covers closing)
− Mortgage payoff− $58,000
− Federal § 1250 recapture (25%)− $7,600
− Federal LTCG (15%)− $3,450
− Ohio income tax (3.5%)− $1,869
7–21 day close. Tenants stay (lease transfers to buyer). No repairs. No showings. No financing contingencies.
The depreciation-recapture surprise: Both scenarios above owe roughly the same recapture tax ($7,600 federal at the 25% max rate) because recapture is anchored to your accumulated depreciation ($30,400 after 11 years), not your sale price. You owe this tax even if you never claimed depreciation on Schedule E — see FAQ #2 for the IRC § 1250(b)(3) "allowed or allowable" rule.

Illustrative comparison only. Not a formal cash offer, net-sheet, or tax opinion. Actual investor offers, listing nets, and tax outcomes vary by property, market, and personal tax situation. Consult a CPA before making any sale decision.

How your tax basis is built

Original purchase price$95,000
+ Capital improvements+ $12,000
Land allocation (20%, not depreciable)$19,000
Building basis (80%)$76,000
Annual depreciation (27.5-yr SL)$2,764
Years held (11 yrs of actual depreciation)$30,400
Adjusted tax basis at sale$76,600

Your taxable gain = (sale price − selling costs) − adjusted basis. The portion of that gain up to your accumulated depreciation ($30,400) is taxed as unrecaptured § 1250 gain at the 25% federal max rate. The remainder is taxed at your federal LTCG bracket (0/15/20%), plus 3.8% NIIT if applicable, plus Ohio's 3.5% top rate if you're an Ohio resident.

Path 4 — 1031 Like-Kind Exchange (defer the entire tax bill)

Roll $103,000 into your next property — defer $18,654 of tax

Under IRC § 1031, exchanging your rental for another investment property defers the entire federal capital-gains tax, federal § 1250 recapture, NIIT, and Ohio income tax. Your full $161,000 retail proceeds (minus the $58,000 mortgage payoff) become buying power for the replacement property — versus only $80,546 of after-tax cash if you sold and paid the tax now.

  • Use a Qualified Intermediary (QI) — you can NEVER touch the funds yourself
  • Identify up to 3 replacement properties within 45 days of closing the sale
  • Close on the replacement within 180 days
  • Replacement value must equal or exceed sale price (or you owe tax on the cash "boot")
  • Like-kind is broad: a Dayton SFR can exchange for an apartment building, raw land, a warehouse, or a rental in another state

Educational illustration only. The mechanics are strict and the exchange must be set up BEFORE you close on the sale. Talk to a 1031 QI and CPA before listing.

Year-by-year hold projection (10 yr)

YrEff. rentOp exNOICash flowCumulative
1$16,284$6,200$10,084$1,444$1,444
2$16,773$6,386$10,387$1,747$3,191
3$17,276$6,578$10,698$2,058$5,249
4$17,794$6,775$11,019$2,379$7,628
5$18,328$6,978$11,350$2,710$10,337
6$18,878$7,187$11,690$3,050$13,387
7$19,444$7,403$12,041$3,401$16,788
8$20,027$7,625$12,402$3,762$20,550
9$20,628$7,854$12,774$4,134$24,684
10$21,247$8,090$13,157$4,517$29,202
Future sale at year 10: FMV grows to $235,185 at 3.0%/yr, with $58,036 total accumulated depreciation. Future taxable gain $167,407, future total tax $36,774, future sale net cash $121,597. Combined with cumulative cash flow $29,202 → total nominal hold position $150,798.

Nominal dollars at year 10 — NOT inflation-adjusted, NOT compared against alternative investments (e.g., S&P 500 at 7%/yr would turn today's net cash sale into roughly $158,446 in 10 years). The hold scenario also assumes mortgage balance stays at $58,000 (real amortization would reduce it, slightly improving the hold outcome).

Want a real cash offer for your Ohio rental?

Mike Wall has bought 300+ Dayton-area properties since 2016 — including dozens of rentals with tenants in place, non-paying tenants, deferred maintenance, and code violations. Get a same-day cash offer with no obligation.

How this calculator works

Tax basis & depreciation

  • Building basis = purchase price × (1 − land %). Land is not depreciable. Land allocation applies to the original purchase only — capital improvements are added to your basis at sale (see below) rather than land-allocated.
  • Annual depreciation = building basis ÷ 27.5 years (straight-line, IRC § 168(c)).
  • Accumulated depreciation = annual × years held, capped at building basis. Per IRC § 1250(b)(3) the IRS treats this as the LESSER of "allowed or allowable" — meaning you owe recapture even if you never claimed depreciation on Schedule E.
  • Adjusted basis at sale = purchase price + capital improvements − accumulated depreciation.
  • Simplification: capital improvements are added to your basis at sale but are NOT separately depreciated over their own 27.5-year schedule from the date placed in service (a strict reading of IRS regs would do so). Most small landlords add improvements to basis at sale and the IRS rarely audits this for residential rentals, but a CPA may model improvements differently — which would slightly increase accumulated depreciation and slightly increase your recapture tax. Talk to your CPA if your improvements were a large fraction of your basis.

Tax on sale (both retail and cash)

  • Total gain = (sale price − selling costs) − adjusted basis.
  • Unrecaptured § 1250 gain = the lesser of accumulated depreciation OR total gain. Taxed at the federal MAX rate of 25% (IRC § 1(h)(1)(E)).
  • Long-term capital gain = total gain − recapture portion. Taxed at the federal LTCG rate you select (0%, 15%, or 20% under IRC § 1(h)).
  • Net Investment Income Tax = 3.8% on the entire taxable gain if your MAGI exceeds $200K single / $250K MFJ (IRC § 1411).
  • Ohio income tax = 3.5% on the entire taxable gain (Ohio's top marginal rate post-HB 33; conservative for most middle-and-upper landlords).

Hold-period projection

  • Year-by-year cash flow = effective rent × (1 + rent growth)^(year-1) − operating expenses × (1 + expense growth)^(year-1) − annual mortgage payment.
  • Future sale at year N: FMV grows at appreciation %, accumulated depreciation extends to (years held + N) capped at building basis, and the same tax mechanics apply at year-N rates.
  • Total hold position = cumulative N-year cash flow + future sale net cash. Reported in nominal year-N dollars, NOT inflation-adjusted.

1031 exchange

  • Buying power for the replacement property = full retail net sale proceeds − mortgage payoff. Tax owed on sale = $0.
  • Tax deferred = the entire federal recapture + federal LTCG + NIIT + Ohio tax that would have been owed on a non-1031 retail sale.
  • The deferred tax basis CARRIES OVER into the replacement property — eventually owed when you sell the replacement (unless you 1031 again, or hold until death so heirs get a stepped-up basis under IRC § 1014).

Important: This is a planning tool, not tax advice. Real returns from selling a rental property depend on factors this calculator doesn't model, including: passive-activity loss carryovers (IRC § 469), at-risk limitations (IRC § 465), prior installment-sale recapture, alternative-minimum-tax interactions, state-of-residence vs property-state allocations, and your specific marginal income brackets in the year of sale. Consult a CPA who knows rental property before making a sale decision.

Sources & authoritative references

  • Internal Revenue Code § 168(c) — 27.5-year residential rental depreciation
  • IRC § 1(h)(1)(E) — 25% federal max rate on unrecaptured § 1250 gain
  • IRC § 1(h) — 0%, 15%, 20% long-term capital-gains brackets
  • IRC § 1250(b)(3) — depreciation "allowed or allowable" rule
  • IRC § 1411 — 3.8% Net Investment Income Tax (statutory thresholds, not inflation-indexed)
  • IRC § 1031 — like-kind exchange of real property held for investment
  • IRC § 469 — passive-activity loss limitation rules
  • IRS Publication 527 — Residential Rental Property
  • IRS Publication 544 — Sales and Other Dispositions of Assets
  • Ohio HB 33 (2023) — top marginal income-tax rate of 3.5%
  • Ohio Revised Code § 5747.02 — Ohio income tax computation
  • Mike Wall's actual rental-property purchase data on 300+ Dayton-area transactions (2016–2026)

Ohio rental-property sell-vs-hold questions, answered

What is depreciation recapture and why do I owe 25% federal on it?
When you bought your rental property, the IRS allowed (and effectively required) you to deduct the building portion against your rental income each year as 'depreciation' over a 27.5-year straight-line schedule under IRC § 168(c). Those deductions reduced your taxable income while you held the property — but the IRS treats them as a tax-deferred loan, not a permanent tax break. When you sell, the portion of your gain that equals your accumulated depreciation is called 'unrecaptured § 1250 gain' and is taxed at a maximum federal rate of 25% under IRC § 1(h)(1)(E), regardless of your normal capital-gains bracket. So if you took $30,000 of depreciation over a decade and sell for a $50,000 gain, $30,000 is taxed at up to 25% federal ($7,500), and only the remaining $20,000 gets the friendlier 15% or 20% LTCG rate. This is the single biggest 'surprise tax' that catches Dayton landlords who only think about appreciation.
What if I never actually claimed depreciation on my taxes — am I still taxed on it?
Yes — and this is the trap door that catches DIY landlords every year. Under IRC § 1250(b)(3), the recapture amount is the LESSER of depreciation ALLOWED or ALLOWABLE. 'Allowed' means what you actually claimed on Schedule E. 'Allowable' means what you should have claimed under the 27.5-year SL schedule, whether you took it or not. The IRS uses whichever is smaller — but if you skipped depreciation entirely, that smaller number is the 'allowable' amount, which equals the FULL accumulated depreciation. Translation: you owe the recapture tax even if you never got the benefit. Two paths to fix this if you've been under-depreciating: (1) file Form 3115 (Application for Change in Accounting Method) to claim the missed depreciation as a § 481(a) catch-up adjustment in the current year, or (2) amend your last three years of returns. Talk to a CPA who specializes in rentals — this is one of the most common and costly mistakes in single-property landlord taxes.
How is rental property cap rate calculated and what's a good cap rate in Dayton?
Cap rate (capitalization rate) = annual Net Operating Income ÷ current property value. NOI is gross annual rent minus a vacancy allowance minus all operating expenses (taxes, insurance, repairs, maintenance, property management, utilities the owner pays) — but EXCLUDING mortgage payments and depreciation. The cap rate tells you the unlevered yield: what you'd earn if you bought the property cash. As of 2026, Dayton-metro single-family rentals typically pencil to 6–9% cap rates in working-class neighborhoods (Trotwood, Riverside, parts of Huber Heights), 4–6% in stable middle-class areas (Centerville, Beavercreek, Kettering), and 3–5% in premium suburbs (Oakwood, Springboro). Lower cap rate doesn't mean worse — it usually reflects lower vacancy, lower turnover, and more appreciation. Higher cap rate often comes with more management headache. The calculator above shows your cap rate so you can compare against your alternatives (a 5% Treasury bond, a 7% S&P 500 long-run return, a different rental).
Can a 1031 exchange really eliminate my tax bill on the rental sale?
Defer it, not eliminate it. Under IRC § 1031, you can sell one investment property and roll the entire proceeds (sale price minus selling costs minus mortgage payoff) into a 'like-kind' replacement property without recognizing gain at the time of sale. For real estate, 'like-kind' is broad — a Dayton rental can be exchanged for an apartment building in Cincinnati, raw land, an industrial warehouse, or a rental in another state. The federal capital-gains tax, the depreciation-recapture tax, the NIIT, and Ohio income tax on the gain are ALL deferred. The mechanics are strict: (1) you must use a Qualified Intermediary (QI) — you cannot touch the funds, (2) you must IDENTIFY up to three replacement properties within 45 days of closing the sale, (3) you must CLOSE on the replacement within 180 days, and (4) the replacement must be of equal or greater value or you owe tax on the 'boot' (cash difference). The deferred tax basis carries forward into the new property — so you eventually pay it when you sell the next one (unless you 1031 again, or hold until death and your heirs get a stepped-up basis under IRC § 1014, wiping the gain entirely). For long-term landlords building a portfolio, serial 1031s plus eventual step-up is a legitimate strategy to escape rental-property tax altogether across a lifetime.
How does selling with tenants in place to a cash buyer affect my taxes?
The federal and Ohio rates do NOT change — depreciation recapture and capital gains apply identically whether you sell retail, sell to a cash buyer, or 1031 exchange. What changes is the SIZE of the gain (lower sale price = smaller gain = less tax), and the SIZE of your selling costs (cash sales typically have $0 commission and $0 closing costs paid by you). So a cash sale at a lower headline number can sometimes net comparably to a retail sale once you back out 8% selling costs and 4–6 months of carrying. The calculator above shows both scenarios side-by-side. Operational benefits of selling cash with tenants in place: no eviction (we take the property as-is, lease included), no vacating for showings, no risk that a buyer's lender requires repairs FHA/VA inspectors will flag, no tenant-coordination headache around lockbox access, and a 7-21 day close instead of 90+ days. For tired landlords with non-paying tenants or deferred maintenance, the operational savings frequently exceed the headline price gap.
What is unrecaptured § 1250 gain and how is it different from regular capital gains?
Section 1250 of the Internal Revenue Code addresses depreciable real property (buildings). When real estate is sold at a gain, the gain is split into two pieces: (1) the 'unrecaptured § 1250 gain' equal to your accumulated depreciation, taxed at a federal MAXIMUM of 25%, and (2) the remaining 'long-term capital gain' taxed at 0%, 15%, or 20% based on your bracket. The 25% cap is generous compared to § 1245 recapture on equipment (which is taxed at full ordinary income rates), and Congress deliberately structured it this way to encourage real-estate investment. Important nuance: the 25% is a MAXIMUM. If your ordinary marginal rate is below 25% (rare for landlords with W-2 income but possible for retirees), you actually pay the lower rate. Most middle-and-upper-bracket Dayton landlords pay the full 25% on the recapture portion.
Does Ohio tax depreciation recapture differently than federal?
No. Ohio has no separate capital-gains structure and no separate recapture rate. Ohio simply taxes the entire gain — recapture portion AND LTCG portion combined — at your normal Ohio income-tax bracket. After House Bill 33 (effective 2024), Ohio's top marginal rate is 3.5% on income above approximately $100,000 and 2.75% on income between $26,050 and $100,000. The calculator uses 3.5% as a conservative estimate for most middle-and-upper landlords; if you're in the lower bracket, your actual Ohio tax will be slightly less. Ohio also conforms to the federal definition of basis, so your stepped-up basis from a prior 1031 carries through to your Ohio return identically. Heads up: if you sell to a 1031 exchange but then 'boot out' (take some cash instead of fully reinvesting), Ohio taxes the boot the same way the IRS does.
When does the 3.8% Net Investment Income Tax (NIIT) apply to my rental sale?
The NIIT is an additional 3.8% federal tax under IRC § 1411 that applies to the LESSER of (a) your net investment income or (b) the amount your modified adjusted gross income (MAGI) exceeds the statutory threshold. The thresholds — set in 2013 and NOT inflation-indexed — are $200,000 for single filers and $250,000 for joint filers. For most middle-class landlords with W-2 income under those thresholds, the NIIT does NOT apply even on a profitable rental sale (because the gain itself, while recognized, doesn't push them over the line, and most W-2 income alone keeps them under). For high-W-2 earners or for landlords whose rental sale alone pushes MAGI above the threshold, the NIIT adds 3.8% to the entire taxable gain — recapture portion AND LTCG portion both. A profitable rental sale frequently triggers the NIIT in the year of sale even for landlords whose normal income is below the threshold, because the sale itself spikes MAGI. Talk to a CPA before pulling the trigger if you're anywhere near the threshold.
How do capital improvements (new roof, HVAC, kitchen remodel) affect my tax basis?
Capital improvements ADD to your tax basis dollar-for-dollar, reducing your taxable gain when you sell. The IRS draws a line between 'repairs' (deductible against current rental income on Schedule E) and 'improvements' (added to basis and recovered via depreciation). Improvements include: new roof, new HVAC system, kitchen or bathroom remodel, room addition, foundation work, full window replacement, finishing a basement, new plumbing or electrical system, fence, deck, garage. Repairs include: patching the roof, fixing a leaky faucet, repainting, replacing a window pane, swapping a broken appliance. Two important rules: (1) improvements technically should be depreciated over their own 27.5-year schedule from the date placed in service, not added to original basis on day one — a strict reading. Most small landlords simplify by adding to basis at sale and the IRS rarely audits this for residential rentals. (2) Your CPA may have you using the 'tangible property regulations' safe harbors (de minimis, routine maintenance, small-taxpayer) to expense some borderline items currently. If you have detailed records of every improvement, plug the total into the calculator above to see how much it shrinks your gain.
What's the breakeven year for hold-vs-sell on a typical Dayton rental?
Highly property-specific, but the mental model is: hold-vs-sell breakeven = the year where (cumulative net cash flow) + (future sale net AT THAT YEAR, after future taxes) equals (sell-now net invested at your alternative rate). For a typical Dayton SFR with a 6% cap rate, modest leverage, 3% rent growth, and 3% appreciation, the hold scenario USUALLY wins in nominal dollars over 10+ years — but loses to a sell-now-and-invest-the-proceeds-in-equities scenario IF you assume a 7% real S&P return. The hold scenario also concentrates your wealth in one illiquid asset in one neighborhood with one tenant risk, whereas the equities path diversifies. The right answer depends on your age, your tax bracket, your alternative investments, your tenant situation, your local market trajectory, and your personal tolerance for landlord headaches. The calculator above is meant to help you see the numbers under each scenario, not to recommend one over the other.
What if my rental has been operating at a loss — does that change the tax picture?
Operating losses (rental income minus expenses minus depreciation comes out negative on Schedule E) are typically PASSIVE losses under IRC § 469 and are limited in deductibility against your W-2 income. Losses you couldn't deduct each year aren't lost — they SUSPEND and carry forward as 'passive activity loss carryovers.' When you sell the property in a 'fully taxable disposition,' all suspended PALs from THIS property are released and become deductible against the current-year gain (and then any remaining can offset other ordinary income up to the limit). For landlords who have been hit by passive-loss limits for years, the year of sale often produces a much smaller net taxable gain than the calculator above suggests — the suspended losses absorb a chunk of the recapture and LTCG. This calculator does NOT model PALs (it would require asking for your carryover balance, which most landlords don't know off the top of their head). Pull your last 1040 Form 8582 to find the suspended PAL number, then subtract that from the calculator's 'taxable gain' to get a more accurate picture. As always, a CPA who knows your situation will produce a sharper number.
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