Capital gains tax on a land sale

How capital gains works on land

When you sell land for more than your basis, the profit is a capital gain. Hold it more than a year and it is a long term gain, taxed at 0, 15 or 20 percent depending on your income. Hold it a year or less and it is short term, taxed at your ordinary income rate. High earners add the 3.8 percent net investment income tax. States differ: some take a cut, some take none, and that is on top of the federal figure here.

Inherited land is the big one

Inherited land gets a stepped up basis. Your basis is reset to the fair market value on the date the previous owner died, not what they originally paid. So your taxable gain is only the appreciation since then. If you sell soon after inheriting, the gain, and the tax, is often little or nothing. This is why selling inherited land is frequently far less taxing than people fear. See the inherited land guide.

2026 figures used

• Long term 0% up to $49,450 taxable income single, $98,900 joint; 20% above $545,500 single, $613,700 joint; 15% in between. CNBC, Tax Foundation, Tax47.
• Net investment income tax 3.8% over MAGI $200,000 single, $250,000 joint, not inflation indexed. Kiplinger.
• Stepped up basis on inherited property: basis is the date of death fair market value (IRS).

Estimate for planning only, not tax advice, and federal only. Talk to a CPA before you act.