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Depreciation Recapture Calculator
Enter your accumulated depreciation, additional capital gain and tax rates to see how much of your gain will be taxed as ordinary income at 25% under §1250 recapture rules.
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What depreciation recapture is and why it matters
- Depreciation deductions reduce your taxable income each year you own a rental. Under §168, residential rental property is depreciated over 27.5 years on a straight-line basis.
- §1250 recapture: when you sell, the IRS "recaptures" the depreciation you took by taxing that portion of your gain at a maximum federal rate of 25% — higher than the typical long-term capital gains rate of 0%, 15% or 20%.
- Total gain breakdown: if you sell for more than your adjusted basis (purchase price + improvements − accumulated depreciation), the gain is split into (1) the §1250 recapture amount, taxed at up to 25%, and (2) the remaining long-term capital gain, taxed at your LTCG rate.
- Net investment income tax (NIIT): an additional 3.8% applies to the full gain for high-income taxpayers (MAGI above $200,000 single / $250,000 MFJ).
- 1031 exchange: a like-kind exchange defers both the §1250 recapture and the LTCG. The deferred depreciation and gain carry into the new property's basis. See the 1031 exchange calculator for details.
Worked example
You purchased a rental for $220,000, depreciated $50,000 over 6 years (residential, 27.5-yr life), made $10,000 in improvements, and sold for $350,000. Selling costs: $21,000 (6%). Amount realized: $329,000. Adjusted basis: $220,000 + $10,000 − $50,000 = $180,000. Total gain: $329,000 − $180,000 = $149,000.
§1250 recapture: $50,000 taxed at 25% = $12,500. Additional capital gain: $149,000 − $50,000 = $99,000 taxed at 15% LTCG = $14,850. NIIT (assumed 0%): $0. State tax (assumed 0%): $0. Total federal tax: $27,350. Effective rate on total gain: 18.4%.
Frequently asked questions
What is the §1250 recapture rate?
The maximum federal rate is 25% for unrecaptured §1250 gain (the accumulated straight-line depreciation on real property). This rate applies regardless of your marginal income tax bracket — even if your bracket is 37%, §1250 real property recapture is capped at 25%. (§1245 personal property recapture, which applies to cost-segregated 5-year and 15-year assets, is taxed at your full ordinary income rate.)
Does §1250 recapture apply to a primary residence sale?
Partially. If you converted a rental to a primary residence and qualify for the §121 exclusion ($250,000 / $500,000), you can exclude the capital gain — but not the §1250 recapture. Depreciation taken during the rental period is still taxed at 25%, even if the overall gain is excluded.
How can I avoid or defer depreciation recapture?
A 1031 exchange defers it into the replacement property. Holding until death gives heirs a stepped-up basis, eliminating both LTCG and recapture. Dying with the property sounds grim, but the stepped-up basis is a major estate planning tool for real estate investors. Charitable remainder trusts can also defer or eliminate recapture in some situations.
What if I never took depreciation deductions?
You are still subject to recapture. The IRS taxes "allowed or allowable" depreciation — meaning the amount you could have taken, even if you did not. Failing to take depreciation does not protect you from recapture; it only means you gave up a deduction without getting the tax deferral benefit.
Formulas last reviewed . Results are estimates for educational use; not financial advice. Methodology →