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After-Tax Cash Flow & Tax at Sale

Calculates annual depreciation and tax savings, the tax due at sale split into depreciation recapture and capital gain, and the resulting after-tax levered IRR and NPV on the chapter’s worked deal. The interactive inputs are the depreciable basis, recovery period, ordinary, recapture, and capital gain tax rates, up-front loan costs, and the after-tax required return, while the operating deal itself stays fixed.

By Devon Coombs, CPA, MBA · Teaching Professor of Finance, Santa Clara University · Reviewed August 2026

From the author: Devon Coombs, CPA, MBA teaches finance at Santa Clara University and works with corporate teams on practical AI.

AI training for finance teams · Consulting · The 10 Laws of Finance

Interactive Tool

After-Tax Cash Flow & Tax at Sale

Tax assumptions

Operating cash flows are fixed to the Part Seven $30M deal (60% LTV at 6.0%). Vary the tax layer below.

Basis to improvements
Recovery period
Ordinary tax rate
Recapture rate (§1250)
Capital gain rate
Up-front loan costs
Loan term (for amortizing costs)
After-tax required return

Annual after-tax cash flow

Y1NOI $1,650,000−int $1,073,987−dep $836,364TI −$272,351ATCF $384,294
Y2NOI $1,699,500−int $1,060,354−dep $872,727TI −$245,581ATCF $423,104
Y3NOI $1,750,485−int $1,045,879−dep $872,727TI −$180,122ATCF $449,832
Y4NOI $1,803,000−int $1,030,512−dep $872,727TI −$112,240ATCF $477,215
Y5NOI $1,857,090−int $1,014,198−dep $836,364TI −$5,472ATCF $492,535

Annual depreciation

$872,727

$24,000,000 ÷ 27.5

Total depreciation

$4,290,909

over 5 yrs (mid-month)

Loan-cost amort / yr

$12,000

$300,000 left at sale

Tax at sale: recapture first, then gain

Adjusted basis (price − depreciation)

$25,709,091

Total gain (net price − adj. basis)

$6,891,712

Recapture: $4,290,909 × 25%

$1,072,727

Capital gain: $2,600,803 × 15%

$390,120

Loan-cost write-off × 35%

−$105,000 saved

Net tax due at sale

$1,357,848

Before-tax sale equity

$15,851,019

net price − loan

After-tax sale equity

$14,493,171

− tax at sale

After-tax levered IRR

6.60%

before-tax 8.57%

After-tax NPV

−$215,428

at 7.00%

The return runs on the full $12,360,000 outlay: the $12,000,000 down payment plus $360,000 of up-front financing costs paid at closing. Depreciation shelters operating income now, then returns at sale as recapture taxed at 25%, a deferral, not forgiveness. Compare after-tax cash flows only with an after-tax hurdle rate.

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This calculator comes from the free Real Estate Finance course, where the concept is taught with readings, worked examples, and practice questions.

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Built by Devon Coombs, CPA, MBA, Teaching Professor of Finance at Santa Clara University.