Do you have to pay capital gains tax on a rental home that was sold for less than what you originally paid for it?

Presuming it was accounted for each year properly, maybe: Sure, there is no gain in the way you present it, and instead you would have the tax benefit of a loss. (So reportable as a capital transaction, but at a loss). The capital gain loss is calculated from your basis VS the sale price (minus applicable transaction costs, like broker fees). The basis is your original cost, and many other things - improvements for exmple and minus some others, particularly depreciation. So your tax gain or loss may be much different that it wuld be as you calculate. For example, if you depreciated (and actually even if you didn't by how the law reads), the property properly during ownership...and received all the years of tax benefits while doing so, every years depreciation reduces your basis. Therefore, it is possible your tax basis is now much. much less than you paid for it (even 0), and when sold, could produce a capital gain.