When you exit the fund, two tax regimes come into play: Capital gains and ordinary income (depreciation & recapture). You'll likely pay both taxes, but on different parts of the sale — the same dollar isn't getting taxed twice.
Let's look at the differences:
Tax bucket | Used for | Typical top rate¹ |
Long-term capital gains | Applied to the gains you make from appreciation | 23.8% – 38.6% |
Ordinary income (depreciation & recapture) | Applied to the depreciation deductions you claimed, which are recaptured as ordinary income at exit | 37% – 51.8% |
Craft assumes the midpoint of your two marginal brackets when modeling, so we don't sugarcoat or overestimate your taxes. You get a balanced estimate.
1. Combined long-term capital-gains rates
Location³ | Fed LTCG (20% + 3.8% NIIT) | State/City | Total |
California | 23.8% | 13.3% | 37.1% |
New York City | 23.8% | 10.9% (NY) + 3.876% (NYC) | 38.6% |
WA / TX / FL | 23.8% | 0% | 23.8% |
2. Combined ordinary-income (recapture) rates
Location³ | Fed ordinary (37%) | State/City | Total |
California | 37% | 13.3% | 50.3% |
New York City | 37% | 10.9% (NY) + 3.876% (NYC) | 51.8% |
WA / TX / FL | 37% | 0% | 37% |
Quick takeaway: Relocating from NYC to a zero-tax state can lower capital-gains exposure by ~15% and ordinary-income exposure by ~15%—dramatically changing after-tax IRR on aircraft.
3. How to estimate your blended rate
Find your top state and city (if applicable) tax rates
Look up the highest rates for both ordinary income and long-term capital gains in your state and city.
Note: most states tax capital gains at the same rate as ordinary incomes but double-check for yours.
Add the federal rates
• Long-term capital gains: 20% + 3.8% NIIT = 23.8%
• Ordinary income: 37%
Combine state, city and federal rates for each bucket
Example:
Long-term capital gains: State % + City % + 23.8%
Ordinary income: State % + City % + 37%
Estimate your blended rate (optional)
If you don’t know the actual split between gains and recapture, you can approximate your blended rate by averaging the two:
(capital-gains rate + ordinary-income rate) ÷ 2
⚠️ This calculation assumes your return is split 50/50 between gains and recaptured deprecations, which may not reflect your situation. Adjust if you have more accurate information.
Enter your estimate
Use the resulting rate as the “Current tax rate” in the Craft calculator.
4. Resources
IRS Topic 409: Capital gains & losses
Tax Foundation: State top marginal rates (2025)
NerdWallet: NY State brackets (2025)
SmartAsset: NYC local tax calculator
Bankrate: States with no income tax
5. Disclaimers
Figures are illustrative only. Rates assume 2025 brackets and highest-earner thresholds; actual liability depends on income level, filing status, and future legislation.
Craft Aviation is not a tax advisor. Consult your CPA for personalized guidance.
Please read our full disclosures before making an investment decision.