Depreciation Recapture Calculator 2025
Calculate Section 1250 depreciation recapture tax when selling a rental property. Includes 25% recapture rate, long-term capital gains and total tax on sale.
$
$
Additions, renovations (not repairs) $
Total depreciation deducted since purchase $
After commissions, closing costs $
$0
Total Tax on Sale
$0
Depreciation Recapture Tax (25%)
$0
Long-Term CG Tax
$0
Net After-Tax Proceeds
Sale Tax Calculation Breakdown
How to Use This Depreciation Recapture Calculator
Enter your original purchase price plus any capital improvements, your accumulated depreciation claimed over the years, and your net sale price after commissions and closing costs. The calculator separates your gain into two components: the depreciation recapture portion (taxed at max 25%) and the remaining capital gain (taxed at long-term rates).
The Formula
Adjusted Basis = Original Cost + Improvements β Accumulated Depreciation
Total Gain = Sale Price β Adjusted Basis
Depreciation Recapture (Sec. 1250) = Accumulated Depreciation (up to total gain)
Recapture Tax Rate = Max 25% (Section 1250 unrecaptured gain)
Remaining Gain = Total Gain β Recapture Gain
LT Capital Gains Rate = 0% / 15% / 20% based on income
Total Tax = Recapture Tax + LT CG Tax
Total Gain = Sale Price β Adjusted Basis
Depreciation Recapture (Sec. 1250) = Accumulated Depreciation (up to total gain)
Recapture Tax Rate = Max 25% (Section 1250 unrecaptured gain)
Remaining Gain = Total Gain β Recapture Gain
LT Capital Gains Rate = 0% / 15% / 20% based on income
Total Tax = Recapture Tax + LT CG Tax
Example
Sam sells rental property for $480,000 (net); original cost $350,000 + $20,000 improvements; $60,000 depreciation claimed; single, $100K other income:
Adjusted basis: $350,000 + $20,000 β $60,000 = $310,000
Total gain: $480,000 β $310,000 = $170,000
Section 1250 recapture: $60,000 Γ 25% = $15,000
LT capital gain: $110,000 Γ 15% = $16,500
Total tax: $31,500
Net proceeds: $480,000 β $31,500 = $448,500
Adjusted basis: $350,000 + $20,000 β $60,000 = $310,000
Total gain: $480,000 β $310,000 = $170,000
Section 1250 recapture: $60,000 Γ 25% = $15,000
LT capital gain: $110,000 Γ 15% = $16,500
Total tax: $31,500
Net proceeds: $480,000 β $31,500 = $448,500
Extended
Strategies to Minimize Depreciation Recapture
Compare 1031 exchange, installment sale and other strategies to reduce your recapture tax
Compare strategies to reduce or defer your depreciation recapture and capital gains tax.
| Strategy | Tax Now | Tax Deferred | Net Benefit | Notes |
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Frequently Asked Questions
What is depreciation recapture?
Depreciation recapture is the IRS process of "recapturing" the tax benefit you received from depreciation deductions when you sell a rental or business property. When you sell, the accumulated depreciation reduces your cost basis, creating a larger taxable gain. The portion of gain attributable to depreciation is taxed at a higher rate than regular long-term capital gains β up to 25% for real property (Section 1250 gain).
What is the Section 1250 recapture rate?
For real property (rental homes, commercial buildings), Section 1250 unrecaptured depreciation is taxed at a maximum rate of 25%, regardless of your regular long-term capital gains rate. This rate is lower than the ordinary income rate but higher than the 0%/15%/20% long-term capital gains rate. For personal property (equipment, vehicles) under Section 1245, recapture is taxed at ordinary income rates.
How does depreciation recapture affect my adjusted cost basis?
Your adjusted cost basis is your original purchase price plus any capital improvements, minus the accumulated depreciation you have claimed. For example, if you bought a rental property for $350,000 (building value $280,000), claimed $60,000 in depreciation over time, and sold for $400,000, your adjusted basis is $350,000 β $60,000 = $290,000. Your total gain is $110,000, with $60,000 subject to 25% recapture and $50,000 taxed at long-term rates.
Can a 1031 exchange defer depreciation recapture?
Yes. A Section 1031 like-kind exchange allows you to defer both capital gains tax and depreciation recapture by rolling the proceeds into a replacement property of equal or greater value. The accumulated depreciation carries over to the new property's basis, continuing to reduce it. You must identify a replacement property within 45 days and close within 180 days of the sale.
Is there a way to completely avoid depreciation recapture?
The main ways to avoid or reduce recapture: (1) Die holding the property β heirs receive a stepped-up basis, eliminating recapture; (2) Donate the property to charity and deduct the fair market value; (3) Do a 1031 exchange to defer it indefinitely; (4) Offset recapture gain with capital losses; (5) Installment sale to spread the recapture over multiple years, potentially at lower rates.