Updated April 17, 2026
Capital gains tax is the federal and California tax on the profit from selling an investment property held more than one year. Combined rate for most LA multifamily sellers: approximately 33-40% including state and NIIT.
Federal long-term capital gains tax rates: 0%, 15%, or 20% depending on income. Most LA multifamily sellers are at 20%. Net Investment Income Tax (NIIT) adds 3.8% for higher earners. Combined federal: 23.8%. California taxes capital gains as ordinary income — up to 13.3% for top-bracket filers. Combined federal + California on most significant LA multifamily gains: 33-37%, plus depreciation recapture for the depreciation portion.
For LA multifamily sellers with $3M+ gains and no 1031, combined tax can exceed $1M. This is the single largest cost of a straight sale and the single biggest reason sophisticated sellers use 1031 exchanges to defer.
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