Does Utah have a capital gains tax?
Utah capital gains tax on real estate is the state income tax applied to your gain at a single flat rate of 4.45% for 2026. Utah has no separate capital gains tax and no preferential rate, so a building held for 25 years is taxed at the same rate as a paycheck.
The 2026 rate comes from Senate Bill 60, Income Tax Rate Amendments, which lowered the rate in Utah Code 59-10-104 from 4.5% to 4.45%. The bill took effect May 6, 2026 and applies to tax years beginning on or after January 1, 2026, so a sale that closes any time in 2026 is taxed at 4.45%. The same bill cut the corporate rate to 4.45%.
For an apartment owner, the flat rate makes the Utah share easy to estimate: multiply the gain by 4.45%. Neighboring Nevada and Wyoming have no individual income tax, which is one reason some Utah owners look at replacement property there.
Utah income tax rate for 2026
Every dollar of Utah taxable income is taxed at 4.45% in 2026, whether it comes from wages, rent, a short-term gain or a long-term gain. The table shows the recent change.
- Short-term and long-term gains are taxed the same in Utah. The one-year holding period only matters on your federal return.
- The Utah Tax Commission updated its Publication 14 withholding tables for payroll periods starting June 1, 2026 to reflect the lower rate.
| Tax year | Utah rate | Source |
|---|---|---|
| 2025 | 4.5% | Utah Form TC-40 (2025), line 10 |
| 2026 | 4.45% | S.B. 60 (2026), Utah Code 59-10-104 |
The taxpayer tax credit and why it disappears on a big sale
Utah’s flat rate is softened for most households by the taxpayer tax credit, but a large gain wipes that credit out. The credit starts at 6% of your federal standard or itemized deduction and is reduced by 1.3 cents for every dollar of income above a base amount.
On the 2025 Form TC-40, the base amounts were $18,213 for single filers, $27,320 for heads of household and $36,426 for married couples filing jointly. A couple with a $1 million gain is hundreds of thousands of dollars past that line, so the credit phases out to zero and the full 4.45% applies to the gain. In practice, a building sale is taxed at the headline rate.
How Utah and federal capital gains tax stack
Utah tax is figured separately from federal tax and added on top. Federally, long-term gain is taxed at 0%, 15% or 20% depending on where it lands above your other income, and Revenue Procedure 2025-32 puts the start of the 20% rate for 2026 at $613,700 of taxable income for a joint return and $545,500 for a single filer.
The part of the gain equal to depreciation you claimed is unrecaptured Section 1250 gain, taxed federally at up to 25%. The 3.8% net investment income tax is added once modified adjusted gross income passes $250,000 for a joint return or $200,000 for a single filer, unless the rental is part of a real estate professional’s trade or business.
Utah starts its return from federal adjusted gross income, so the federal and state gain are normally the same number. The Utah tax is deductible federally only as part of the capped itemized deduction for state and local taxes, so on a sale this size it gives little federal benefit.
Do nonresidents pay Utah tax when they sell Utah property?
Yes. Gain on Utah real estate is Utah-source income, so a seller who lives in Nevada, California or anywhere else files a Utah return for the year of the sale. Nonresidents and part-year residents figure the tax as if all their income were Utah income, then multiply it by the share that is Utah income on Schedule TC-40B. Capital gain is reported on line 9 of that schedule.
The result is close to 4.45% of the Utah gain for most sellers, since the gain is usually most of the year’s Utah income. Plan for it in your estimated payments. Ask your title company early whether it needs anything from you on the Utah side.
Selling through an LLC or partnership
Most Utah apartment buildings are held in an LLC taxed as a partnership, and Utah requires that entity to withhold tax on the Utah-source income of its nonresident individual members. Under Utah Code 59-10-1403.2 and Tax Commission Publication 68, the withholding rate is the Utah income tax rate in effect on the first day of the entity’s tax year, so 4.45% for a calendar-year entity in 2026.
The withholding is due by the original due date of the entity’s Form TC-65 (or TC-20S for an S corporation), and an extension of time to file does not extend the time to pay. Resident members are not subject to it. Before you list, give your CPA each member’s state of residence and expected share of the gain, so the entity can set aside the cash and the members can claim the credit on their own Utah returns.
Depreciation recapture in Utah
Utah taxes depreciation recapture the same way it taxes the rest of the gain: as ordinary income at 4.45%. There is no Utah version of the federal 25% cap on unrecaptured Section 1250 gain, and none is needed, because every part of the gain already gets the same rate.
That means the split between recapture and capital gain changes only your federal tax. Because Utah begins from federal adjusted gross income, the depreciation you claimed federally, including any bonus depreciation from a cost segregation study, normally reduces your Utah basis by the same amount. Keep the depreciation schedule with your closing file so your CPA can tie both returns together.
Worked example: selling a $2M apartment building in Utah
A married couple filing jointly sells a 20-unit building in Salt Lake County for $2,000,000 and pays $90,000 in selling costs, so the amount realized is $1,910,000. They paid $1,200,000 for it and have taken $400,000 of depreciation, leaving an adjusted basis of $800,000. The gain is $1,110,000: $400,000 of unrecaptured Section 1250 gain and $710,000 of long-term capital gain. They have $260,000 of other taxable income, their modified AGI was already over $250,000 before the sale, and the building carries a $1,000,000 loan.
Federal tax: the $400,000 of Section 1250 gain is figured here at the 25% maximum, $100,000. The $710,000 of capital gain starts at $660,000 of income, above the $613,700 line, so all of it is taxed at 20%, or $142,000. The 3.8% NIIT on $1,110,000 is $42,180. Federal total: $284,180.
Utah tax: the taxpayer tax credit is fully phased out, so the whole $1,110,000 is taxed at 4.45%, which is $49,395. Combined tax is $333,575, about 30% of the gain. After repaying the $1,000,000 loan, the couple has $910,000 of cash before tax and about $576,425 after.
| Item | Amount |
|---|---|
| Sale price | $2,000,000 |
| Selling costs | $90,000 |
| Adjusted basis | $800,000 |
| Total gain | $1,110,000 |
| Federal Section 1250 tax (25%) | $100,000 |
| Federal capital gains tax (20%) | $142,000 |
| Net investment income tax (3.8%) | $42,180 |
| Utah income tax (4.45%) | $49,395 |
| Total tax | $333,575 |
What the 2026 rate cut saves on this sale
S.B. 60 saves this couple $555 compared with a 2025 closing. At the 2025 rate of 4.5%, the Utah tax on $1,110,000 would have been $49,950, against $49,395 at 4.45%. The cut is real but small next to the federal bill, so it is not a reason on its own to move a closing date.
Timing matters more for the federal side. Spreading a sale over two tax years with an installment note, or pairing the sale with a year of low other income, can keep more of the gain out of the 20% bracket. Utah’s flat rate means the state tax is close to the same whichever year the gain lands in.
How a 1031 exchange changes the Utah tax
A properly structured 1031 exchange defers the Utah tax along with the federal tax, because Utah starts from federal adjusted gross income and the deferred gain never reaches it. In the example, buying a replacement of at least $1,910,000 and reinvesting the full $910,000 of net cash would push all $333,575 into the future.
Utah does not track gain that leaves the state. Unlike California, Massachusetts, Montana and Oregon, it has no clawback filing when you exchange a Utah building for one in Idaho or Texas. Cash you keep in a partial exchange is boot, taxed by both the IRS and Utah. Our page on the 1031 exchange in Utah covers the rest.
The 1031 exchange calculator and the capital gains tax calculator run the federal numbers for your own sale.
Ways Utah sellers lower the tax
With one flat rate, Utah planning is mostly about deferral and basis.
- A 1031 exchange, inside Utah or out of state, with no Utah tracking form.
- An installment sale, which helps mostly on the federal side by keeping gain out of the 20% bracket.
- Holding until death, so heirs get a stepped-up basis for federal and Utah purposes.
- Documenting every capital improvement, roof and boiler, since each dollar of basis cuts the gain at 4.45% plus the federal rate.
Selling a Utah apartment building
Skyline buys apartment buildings with five or more units in Utah, from Salt Lake City, Provo and Ogden to St. George and Logan. We buy directly, close on your timeline, and can work inside 1031 deadlines. If you are exchanging, we can pick a closing date that leaves room to line up the replacement, and we work with your intermediary on the contract assignment.
For the yearly carrying cost a buyer will look at, see the property tax rate in Utah. For notice, deposit and eviction rules that come with the tenants, see Utah landlord-tenant law for apartment owners.
Selling? Spread the tax with seller-carry terms
If a large tax bill is what is keeping you from selling, an installment sale may help. When you carry part of the price as a note, the gain is generally reported as you receive payments instead of all in the year of sale. Some parts of the gain, such as certain depreciation recapture, can still be due up front, so run the numbers with your CPA first.
Skyline Capital Investments buys apartment buildings with five or more units and can offer seller-carry terms, or a delayed closing that fits your 1031 timeline. Send the address and unit count and we typically respond within 48 hours. How seller financing works · How an installment sale is taxed · Seller financing calculator.
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