Worksheet 03 · Proceeds

After-tax proceeds calculator, California 2026.

This sheet estimates what a seller keeps from a practice sale after federal and California income tax. It applies the installment method to the payment schedule, the 2026 federal brackets to the gain, and the California rate schedule, year by year.

Enter the price, the split between cash at close, seller note, and earnout, the purchase-price allocation, and your filing status.

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After-tax proceeds worksheet Sheet 03 · Rev. 2026-09
A The offer
Consideration for the practice, before any consulting agreement.
$
Competing offers today are mostly between 70 and 100%.
75%
Equal annual principal payments with interest on the balance.
15%
Note term and rate
yrs%
Retention holdback or earnoutThe part that is not cash or note. Paid over the period below if clients stay.
10%
Earnout period and expected collectionSellers collect 60 to 85% of an earnout on average, depending on retention.
yrs%
B What is being sold
Form of saleC corporations pay entity-level tax on an asset sale and are not modeled here.
Long-term capital gain. Eligible for the installment method.
90%
Assumed fully depreciated. Ordinary recapture in the year of sale.
3%
Allocated to the non-compete covenantThe remainder. Ordinary income to the seller as paid. The buyer amortizes it over fifteen years.
7%
Usually zero unless you bought the practice or part of it. Unamortized purchased goodwill counts.
$
Per year, for the number of years shown. Ordinary income plus self-employment tax.
$yrs
C Seller
Filing status
Wages, a spouse’s income, investments. Sets where the gain falls in the brackets.
$
Material participationGain on an active practice is outside the 3.8% net investment income tax. Note interest is not.
Net after all payments and taxes

$0

0% effective tax on $0 paid

Federal income tax$0
Net investment income tax$0
Self-employment tax on consulting$0
California income tax$0
Total tax$0
Comparisons
Same deal, all cash at close, net$0
Deferred, dependent on retention$0
Ten points moved from goodwill to non-compete+$0 tax

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Schedule C · Year by year
YearPaid to sellerCapital gainOrdinary incomeFederalNIIT and SECaliforniaNet

Year 0 is the closing year. Ordinary income includes non-compete payments, equipment recapture, note interest, and consulting. Tax is the increase over what is owed on other income alone.

How the sheet works

Allocation

Goodwill and the client list are capital assets. The gain is long-term and, with material participation, outside the net investment income tax. Payments for a non-compete covenant are ordinary income. The buyer amortizes both over fifteen years under Section 197, so the allocation does not change the buyer’s tax. Form 8594 must match on both returns.

Deferral

Under the installment method, gain on a seller note is recognized as principal is received. Spreading a gain over several years can keep more of it in the 15% federal bracket. California conforms. Deferred payments depend on the buyer paying and on client retention.

California

California taxes capital gain as ordinary income. The rate is 9.3% for most of the range, 12.3% above $742,953 for a single filer, and 1% more on taxable income above $1,000,000. The sheet assumes California residency in every payment year.

Sources and assumptions

Rates and thresholds

  1. Federal 2026 ordinary brackets and standard deduction ($16,100 single, $32,200 joint): IRS Rev. Proc. 2025-32.
  2. Federal 2026 long-term capital gain breakpoints: 0% to $49,450 single / $98,900 joint; 15% to $545,500 / $613,700; 20% above. Rev. Proc. 2025-32.
  3. Net investment income tax: 3.8% above $200,000 single / $250,000 joint MAGI (not indexed), IRC §1411. Gain from a trade or business with material participation is excluded, Reg. §1.1411-4. Note interest is included.
  4. Self-employment tax: 15.3% on 92.35% of net earnings up to the $184,500 2026 Social Security wage base, 2.9% above.
  5. California 2025 tax rate schedules (Franchise Tax Board), standard deduction $5,540 single / $11,080 joint, plus the 1% mental health services tax on taxable income over $1,000,000. The 2026 indexed schedules are published in the fall. This sheet will be updated then.
  6. Installment method: IRC §453. California conforms. Purchase-price allocation: IRC §1060 and Form 8594. §197 amortization of goodwill and covenants. §1245 recapture on equipment.
  7. Deal terms: cash at close in competing offers 70 to 100% (Poe Group Advisors). Earnouts collected at 60 to 85% (CT Acquisitions, 2026).

Simplifications

  • Gain on goodwill is recognized as payments arrive, using a single gross-profit ratio. Contingent earnout payments are treated the same way, without the basis-recovery rules for contingent-price sales in Reg. §15A.453-1(c).
  • Non-compete payments are ordinary as received. Equipment recapture is recognized in full in the closing year. Note interest is the stated rate on the declining balance, with no imputed-interest test.
  • Standard deduction only. No itemized deductions, AMT, QBI, credits, or the deduction for half of self-employment tax. Other income is ordinary and the same every year. 2026 federal and 2025 California figures are held flat for later years.
  • Tax attributable to the sale is the difference between tax with the sale and tax on other income alone, in each year.
  • This is an estimate. It is not a return position or tax advice.
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Questions about an offer

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