Depreciation deductions taken while owning a property come back to bite at sale — a portion of the gain gets taxed at a higher rate specifically because depreciation reduced basis along the way.
How it works
Total gain is sale price minus adjusted basis. Whichever is smaller — the total gain or the depreciation actually claimed — is taxed at the 25% unrecaptured §1250 rate; any remaining gain is taxed at the standard long-term capital gains rate.
What this does not include
This computes federal tax only — many states also tax the gain, often without a separate lower rate for the recaptured portion, adding to the total tax burden this calculator doesn’t include.
How to use this calculator
- Enter sale price, adjusted basis, and total depreciation claimed.
- Enter your long-term capital gains rate.
Frequently asked questions
Why is depreciation recapture taxed higher than regular capital gains?
Because the depreciation deductions already reduced ordinary or business income while the property was held — recapture partially reverses that earlier tax benefit at sale, at a rate between ordinary and standard capital gains rates.
Does a 1031 exchange avoid depreciation recapture?
Yes — a qualifying 1031 exchange defers both the capital gain and the depreciation recapture, which this site’s separate 1031 exchange calculator addresses.
What if I sell for less than my original purchase price?
You can still owe depreciation recapture even at an overall loss from the original purchase price, if the sale price exceeds the depreciated (adjusted) basis — recapture compares against basis, not the original price.
