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Depreciation Recapture Tax Calculator
When a depreciated rental sells at a gain, the IRS recaptures the depreciation at up to 25% (Section 1250). Excess gain over recapture is taxed at standard long-term capital gains rates. State tax stacks on top.
Total tax owed
$55,500
22.7% of gain
Depreciation recapture tax
$16,250
on $65,000
Capital gains tax (federal)
$27,000
on $180,000
State tax
$12,250
How recapture works
When you sell a depreciated rental, gain up to total depreciation taken is recaptured at the Section 1250 unrecaptured gain rate (max 25% federal) — even if you didn't actually claim the depreciation. Gain above recapture is taxed at standard long-term capital gains rates.
1031 exchanges defer both recapture and capital gains. Section 1245 (personal property from cost segregation) recaptures at ordinary income rates instead of 25%. The complexity is real — consult a tax professional for sizable transactions.
How to Use
- Enter the sale price and adjusted basis (basis is reduced by depreciation taken).
- Enter total depreciation taken across all years of ownership.
- Enter the recapture rate (max 25% federal for Section 1250 real estate).
- Enter your federal capital gains rate (0/15/20%) and state rate.
- Read total tax owed and the recapture vs capital gains split.
Frequently Asked Questions
What's Section 1250 recapture?
The IRS rule for real estate. Gain attributable to depreciation taken (or that you should have taken) gets taxed at up to 25% — your ordinary income rate or 25%, whichever is lower. Above the recapture portion, standard long-term capital gains rates apply.
What if I didn't take depreciation?
The IRS still recaptures it at sale. 'Allowed or allowable' rule — you owe recapture on what you should have deducted, regardless of whether you actually did. File Form 3115 to catch up missed depreciation if applicable.
Can a 1031 exchange defer recapture?
Yes — both recapture and capital gains defer in a like-kind exchange. The deferred gains carry into the new property's basis. Eventually they'd be taxed when you sell without exchanging again — or potentially escape via stepped-up basis at death.
How do cost-seg components recapture?
Section 1245 personal property (5-year, 7-year items) recaptures at ordinary income rates — much steeper than 1250's 25% cap. This is why cost segregation reduces tax now but increases recapture later. 1031 exchanges still defer it.
Related Calculators
1031 Exchange Calculator
Defer recapture and capital gains via like-kind exchange.
Capital Gains Tax Calculator
Standard capital gains tax for the gain above recapture.
Cost Basis Calculator
Build the adjusted basis used to compute gain.
Depreciation Schedule Calculator
Track depreciation taken year by year.
Cost Segregation Calculator
Cost seg increases recapture exposure later.
Home Sale Tax Calculator
If converted to primary residence, partial Section 121 may apply.
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