When you sell a property you’ve owned for more than one year, the profit (the difference between the net sales proceeds and the tax basis of the property after subtracting depreciation deductions) is generally treated as a long-term capital gain. As such, it will be taxed at a federal rate of no more than 20% (or 23.8% if you owe the 3.8% Medicare surtax). However, part of the gain—an amount equal to the cumulative depreciation deductions claimed for the property—is subject to a 25% maximum federal rate (28.8% if you owe the 3.8% Medicare surtax). The rest of your gain will be taxed at a maximum federal rate of no more than 20% (or 23.8%).