How much do I keep when I sell my business?

Start with the price, take out debt paid at closing and deal costs, then federal capital gains tax, the 3.8 percent net investment income tax if it applies, and state tax. On a $5 million sale with $500,000 of debt, 5 percent in costs, and a $500,000 basis, an owner in North Carolina paying 20 percent federal plus 3.8 percent keeps roughly $3.07 million, about 61 cents of each dollar of price.

What is the capital gains tax rate on selling a business in 2026?

Long-term capital gains are taxed federally at 0, 15, or 20 percent depending on taxable income. In 2026 the 20 percent rate applies above $545,500 of taxable income for a single filer and $613,700 for married couples filing jointly, so most of a large sale gain lands there. Some of the price may be taxed as ordinary income instead, at rates up to 37 percent.

Does the 3.8 percent net investment income tax apply to a business sale?

It depends on the entity and your role. Gain on C corporation stock is generally subject to it. Gain on an S corporation or partnership interest can be partly or fully excluded to the extent it comes from a business you actively work in. It applies only above $200,000 of modified adjusted gross income for a single filer or $250,000 for a married couple filing jointly.

What part of a sale is taxed as ordinary income?

In an asset sale, depreciation recapture on equipment and some other assets is taxed at ordinary rates. Payments for consulting, employment, or a non-compete are ordinary income too. How the price is allocated among assets, reported on IRS Form 8594, decides how much falls in each bucket, which is why allocation is negotiated.

Does North Carolina tax the gain on selling a business?

Yes. North Carolina taxes capital gains as ordinary income at its flat rate, which is 3.99 percent for tax years after 2025.

How do I reduce taxes on a business sale?

Mostly by deciding the deal structure before you sign a letter of intent, not after closing. The main levers are a stock sale instead of an asset sale, how the price is allocated among the assets, an installment sale that spreads the gain over several tax years, the Section 1202 exclusion for qualifying C corporation stock, giving shares to charity before a deal is agreed, and whether the 3.8 percent net investment income tax applies to you. Each has rules and tradeoffs, and your CPA and attorney should confirm which fit your deal.

When should I start tax planning for selling my business?

Ideally two or more years before a sale. Some tools, like the Section 1202 holding period or converting to a C corporation, take years to work, and charitable gifts of shares must happen before a sale is agreed. Price allocation and installment terms are set in the letter of intent and purchase agreement, so they need attention before you sign.

Free calculators · Business owners

How much will I keep when I sell my business?

Less than the price in the letter of intent, often by a third or more, once debt, deal costs, and taxes come out. Enter your numbers to see your net, and where the rest goes.

What you keep after debt, costs, and tax

Total tax

Kept per dollar of price

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Where the price goes	Amount	Share of price

Hypothetical and educational only. Results are estimates from the figures you enter and the rules cited below. They do not account for every factor in your situation, are not a guarantee of any result, and are not tax, legal, or investment advice. This is a simplified model: it treats the whole gain as long-term, applies one rate to each part, and leaves out working capital adjustments, escrows, earnouts, seller notes, the alternative minimum tax, and phase-outs. Your CPA and attorney should run the real numbers before you sign a letter of intent.

The price is not the number that matters

Owners anchor on the headline price because that is the number in the letter of intent. The number your family lives on is what is left after the company’s debt is paid, the broker, attorneys, and accountants are paid, and federal and state taxes are paid. On a typical sale that gap is a third of the price or more.

Three things move your net the most, and all three are decided before closing: whether the deal is an asset sale or a stock sale, how the price is allocated among the assets, and whether the 3.8 percent net investment income tax applies to you. Planning the year of the sale matters too. A sale gain can push you into higher Medicare premiums two years later; see the IRMAA calculator.

Asset sale or stock sale

Buyers usually prefer to buy assets, because they get a stepped-up basis to depreciate. Sellers usually prefer to sell stock, because more of the gain is taxed at capital gains rates. In an asset sale of an S corporation or partnership, depreciation recapture and some other items are taxed as ordinary income. In an asset sale of a C corporation, the gain can be taxed twice: once inside the company and again when the cash comes out to you. Enter the ordinary income part above to see what the mix does to your net.

How to reduce taxes on a business sale

Most of the tax on a sale is decided before you sign the letter of intent. After closing, there is little left to change. These are the levers owners and their advisors look at first.

Lever	What it can do	When it has to be in place
Stock sale instead of asset sale	More of the gain taxed at capital gains rates, and no second layer of tax for a C corporation	Negotiated in the letter of intent
Price allocation	Moves price toward goodwill, taxed as capital gain, and away from equipment recapture, consulting, and non-compete payments, taxed as ordinary income	Negotiated in the purchase agreement, reported on Form 8594
Installment sale	Spreads the gain over the years you are paid, which can keep more of it in lower brackets; recapture is still taxed in the year of sale	Written into the purchase agreement
Section 1202 exclusion	Can exclude much or all of the gain on qualifying C corporation stock held long enough, up to set limits	Years before the sale; the holding period has to be met
Gift of shares to charity	Avoids tax on the gifted shares and can create a deduction, for owners who planned to give anyway	Before a sale is agreed
The 3.8 percent tax	Active owners of an S corporation or partnership can often exclude part or all of the gain from it	Depends on your role in the years before the sale
Timing against other income	Avoids stacking the sale on top of a Roth conversion or other large income, and plans for the Medicare surcharge two years later	The tax year of closing and the year before

Each lever has rules and tradeoffs, and some trade a lower tax for more risk, such as waiting on a buyer’s payments. For what to do with the proceeds once the wire lands, see what to do with the money after you sell your business. For what drives the price, see how to value your business before a sale.

Questions owners ask

How much do I keep when I sell my business?: Start with the price, take out debt paid at closing and deal costs, then federal capital gains tax, the 3.8 percent net investment income tax if it applies, and state tax. On a $5 million sale with $500,000 of debt, 5 percent in costs, and a $500,000 basis, an owner in North Carolina paying 20 percent federal plus 3.8 percent keeps roughly $3.07 million, about 61 cents of each dollar of price.
What is the capital gains tax rate on selling a business in 2026?: Long-term capital gains are taxed federally at 0, 15, or 20 percent depending on taxable income. In 2026 the 20 percent rate applies above $545,500 of taxable income for a single filer and $613,700 for married couples filing jointly, so most of a large sale gain lands there. Some of the price may be taxed as ordinary income instead, at rates up to 37 percent.
Does the 3.8 percent net investment income tax apply to a business sale?: It depends on the entity and your role. Gain on C corporation stock is generally subject to it. Gain on an S corporation or partnership interest can be partly or fully excluded to the extent it comes from a business you actively work in. It applies only above $200,000 of modified adjusted gross income for a single filer or $250,000 for a married couple filing jointly.
What part of a sale is taxed as ordinary income?: In an asset sale, depreciation recapture on equipment and some other assets is taxed at ordinary rates. Payments for consulting, employment, or a non-compete are ordinary income too. How the price is allocated among assets, reported on IRS Form 8594, decides how much falls in each bucket, which is why allocation is negotiated.
Does North Carolina tax the gain on selling a business?: Yes. North Carolina taxes capital gains as ordinary income at its flat rate, which is 3.99 percent for tax years after 2025.
How do I reduce taxes on a business sale?: Mostly by deciding the deal structure before you sign a letter of intent, not after closing. The main levers are a stock sale instead of an asset sale, how the price is allocated among the assets, an installment sale that spreads the gain over several tax years, the Section 1202 exclusion for qualifying C corporation stock, giving shares to charity before a deal is agreed, and whether the 3.8 percent net investment income tax applies to you. Each has rules and tradeoffs, and your CPA and attorney should confirm which fit your deal.
When should I start tax planning for selling my business?: Ideally two or more years before a sale. Some tools, like the Section 1202 holding period or converting to a C corporation, take years to work, and charitable gifts of shares must happen before a sale is agreed. Price allocation and installment terms are set in the letter of intent and purchase agreement, so they need attention before you sign.

For what drives the price in the first place, see the business value calculator, the free Exit Readiness Scorecard, and the book Before You Sell.

Sources

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