As the short-term rental market matures, many Airbnb hosts are looking to cash in on the equity they’ve built. But before you hit “sell” on that profitable listing, it’s crucial to understand the tax on selling Airbnb properties in 2025. Between capital gains, depreciation recapture, and state taxes, your profit margin can quickly shrink without the right strategy.
The good news? Real estate investors have a powerful ally: the 1031 exchange. Combine that with a smart Airbnb calculator to estimate your returns, and you’ve got a solid game plan to defer taxes and reinvest wisely.
In this article, we’ll break down the tax implications of selling your Airbnb, how to calculate your profits, and how to legally defer capital gains through a 1031 exchange in 2025.
1. Tax on Selling Airbnb: What You Need to Know
Selling an Airbnb is not the same as selling your primary residence. Here are the main taxes that may apply:
a. Capital Gains Tax
- Applies to the profit made between your purchase price (adjusted basis) and selling price.
- Federal capital gains tax ranges from 15% to 20%, depending on your income.
- Some states like California and New York add another 9-13%.
b. Depreciation Recapture
- You’ve likely deducted depreciation on your Airbnb for tax benefits.
- When you sell, the IRS wants some of that back.
- Recapture is taxed at a flat 25% on the depreciation claimed.
c. Net Investment Income Tax (NIIT)
- If your income exceeds $200,000 (single) or $250,000 (married), an additional 3.8% may apply to your gains.
d. State Taxes
- State capital gains taxes can significantly impact your net proceeds.
Example:
| Item | Amount |
| Purchase Price | $300,000 |
| Sale Price | $500,000 |
| Capital Gain | $200,000 |
| Federal Capital Gains Tax (15%) | $30,000 |
| Depreciation Recapture (25% on $75k) | $18,750 |
| Total Tax Owed | ~$48,750 |
Without a tax deferral strategy, nearly 25% of your profit could go to taxes.
2. Use an Airbnb Calculator to Estimate Profits
Before selling, it’s important to calculate:
- Cumulative rental income
- Operating expenses
- Appreciation value
- Projected capital gains tax
Use this free Airbnb ROI & profit estimation tool: GetChalet Airbnb Calculator
This Airbnb calculator provides:
- Average nightly rate in your zip code
- Occupancy rates
- Seasonality factors
- Estimated annual income and costs
- Equity and potential return if sold
By combining this with your tax estimate, you can decide whether to sell or hold.
3. How 1031 Exchange Can Save You Thousands in Taxes
The 1031 exchange is one of the most powerful tools available to real estate investors.
What Is a 1031 Exchange?
A 1031 exchange named after Section 1031 of the Internal Revenue Code, lets you sell an investment property and reinvest the proceeds into another like-kind property without paying immediate capital gains tax.
2025 Rules to Keep in Mind:
- Identify replacement property within 45 days
- Close on purchase within 180 days
- Use a Qualified Intermediary (QI) to handle funds
- Property must be held for investment purposes (not personal use)
Does My Airbnb Qualify?
Yes – if it was:
- Rented for more than 14 days per year
- Not used for personal stays more than 14 days or 10% of total rental days
- Reported as income on Schedule E
- 📊 Which Airbnb rental markets are set to outperform in 2025 based on revenue growth, occupancy trends, and supply shifts.
- 🏡 Where home prices are still affordable while generating high rental income.
- 📈 How to identify markets with strong appreciation potential for both short-term cash flow and long-term gains.
- ⚖ Which cities have the best (and worst) STR regulations—so you don’t get caught off guard.
- 🔎 The demand trends driving guest bookings and what amenities maximize revenue in each market.
4. Airbnb Property Sale Strategy: When and How to Sell
Selling your Airbnb isn’t just about listing it and accepting the highest offer. You need a smart exit strategy:
a. Sell During High Season
- Better occupancy = better valuation
- Investors are more likely to pay a premium when future bookings are secured
b. Bundle Furnishings and Booking History
- A turnkey property with solid revenue history can fetch up to 10–15% more
c. Stage for Buyer Type
- Are you selling to an investor or a second-home buyer?
d. Market in STR-Friendly Areas
If you’re reinvesting, ensure your 1031 exchange target is:
- In a short-term rental friendly city
- Has growing tourism and population demand
- Low regulatory risk
Explore STR-friendly zones using: GetChalet Market Regulations Tool
5. Step-by-Step Guide to Airbnb 1031 Exchange
Step 1: Work With a 1031 Specialist
Hire a QI experienced in short-term rental transactions.
Step 2: List and Market the Airbnb
Ensure your books are clean and occupancy reports are ready.
Step 3: Choose Your Replacement Property
Use the 45-day window to identify another STR-friendly investment. Use this link: STR Market Explorer
Step 4: Close and Transfer Funds via QI
Do not take possession of sale proceeds.
Step 5: Complete the Purchase
Ensure closing occurs within the 180-day window to meet IRS rules.
6. How to Maximize Gains and Defer Taxes in 2025
Combine With Opportunity Zones
Look for 1031-eligible properties in federally designated Opportunity Zones.
Use Advanced Tax Planning
Work with a CPA to explore:
- Installment sales
- Partial 1031 exchanges
- Delaware Statutory Trusts (DSTs)
Plan Your Personal Use
If you wish to personally use your next Airbnb:
- Wait at least 12–18 months
- Limit use to 14 days or 10% of rental days per year
7. Common Mistakes to Avoid
- Missing the 45/180 Day Window
- Disqualifying Personal Use
- Failing to Use a Qualified Intermediary
- Incorrectly Reporting on Taxes
- Choosing Markets With Restrictive STR Rules
FAQs: Selling Airbnb and 1031 Exchange
Q1: Is it legal to sell my Airbnb and do a 1031 exchange?
Yes, as long as the property meets IRS guidelines for investment use.
Q2: How do I find STR-friendly reinvestment areas?
Use GetChalet’s Market Finder to compare occupancy, laws, and returns.
Q3: Can I defer taxes if I sell in one state and buy in another?
Yes. 1031 exchanges work across all U.S. states.
Q4: What happens if I pocket the funds between sales?
The exchange will be disqualified, and you’ll owe full capital gains tax.
Q5: Can I use a 1031 exchange to buy multiple properties?
Yes, as long as total value meets or exceeds your sale price and debt.
Conclusion: Plan Ahead to Save Big
In 2025, real estate investors must be more strategic than ever. The tax on selling Airbnb properties can be significant — but using tools like the Airbnb calculator from GetChalet and leveraging a 1031 exchange can legally defer taxes and maximize reinvestment potential.
The key is documentation, timing, and choosing the right markets. With a little planning and the right advisor, you can turn a taxable event into a wealth-building opportunity.
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