Depreciation Recapture 1031 Deferred Calculator 2026
Estimate the §1250 unrecaptured depreciation that carries over from your relinquished property to the replacement, the NPV of the deferred 25% recapture tax, and what gets recaptured immediately if you receive boot in a 2026 like-kind exchange.
| Adjusted basis (cost − depreciation) | — |
| Realized gain on sale | — |
| §1250 unrecaptured (25% bucket) | — |
| Recognized on boot | — |
| Carryover basis in replacement | — |
| Tax deferred today (if no boot) | — |
| NPV of deferral over hold | — |
A 1031 like-kind exchange under IRC §1031 defers all of the gain on real property held for productive use, including the §1250 unrecaptured-depreciation portion taxed at a 25% federal rate. The depreciation does not vanish — it carries over into the replacement property's basis under Reg §1.1031(d)-1 and is recaptured when the replacement is eventually sold in a taxable transaction.
How §1250 Unrecaptured Gain Carries Over
Section 1250 applies to real property depreciated using straight-line (the only method allowed after 1986). The portion of gain attributable to prior depreciation is "unrecaptured §1250 gain" taxed at a maximum 25% federal rate — higher than the 20% long-term capital-gains top rate. In a fully deferred 1031, that 25% bucket transfers to the replacement: your accumulated depreciation lives on as a carryover, ready to be recaptured at sale. Reg §1.1031(d)-1 sets the replacement basis = relinquished adjusted basis + recognized gain + boot paid − boot received.
What Recapture Triggers Immediately
Under IRC §1031(b), boot received — cash, debt relief not replaced, or non-like-kind property — forces gain recognition up to the boot amount. The recognized portion is recaptured first as §1250 unrecaptured gain (taxed at 25%) before any §1231 capital-gain treatment kicks in. So if you receive $50K of boot and have $90K of §1250 depreciation in the pot, all $50K is recaptured at 25% — none at the lower 20% rate. Pure §1245 personal-property depreciation (rare in real estate but possible on cost-segregation studies) is also recaptured at ordinary rates against any boot received.
NPV of the Deferral — When 1031 Is Worth It
Deferring $20K of recapture tax for 10 years at a 6% personal discount rate is worth about $11K in present value — a 45% saving versus paying today, plus the cash stays invested compounding. The longer you hold the replacement, the bigger the deferral benefit. If you intend to die holding the replacement, the basis steps up under IRC §1014 and your heirs get a free pass on the entire deferred recapture — the so-called "swap till you drop" exit. Mid-life sales without another 1031 trigger the full carryover plus all new appreciation. Sources: IRC §1031, IRC §1250, Reg §1.1031(d)-1.
Last updated May 2026. Federal estimate only — state recapture rules vary (CA has no preferential rate). Consult a CPA before closing.