Depreciation Recapture Calculator 2026
Calculate the depreciation recapture tax owed when selling rental or investment property. This calculator estimates the Section 1250 unrecaptured gain taxed at 25% and the remaining capital gains tax. Enter your original cost basis, accumulated depreciation, and sale price. Based on IRS Section 1250 rules. Free, private, runs in your browser.
What Is Depreciation Recapture?
Depreciation recapture is a tax provision that requires you to pay tax on the depreciation deductions you claimed (or should have claimed) on rental or investment property when you sell it. Under IRS Section 1250, the portion of your gain attributable to accumulated depreciation is taxed at a maximum rate of 25% — higher than the standard long-term capital gains rate of 15-20% for most taxpayers. This applies to residential rental property depreciated over 27.5 years and commercial property depreciated over 39 years using the straight-line method. Even if you did not claim depreciation, the IRS taxes you as if you did — this is the "allowed or allowable" rule under IRS Publication 544. Last updated May 2026.
How Depreciation Recapture Tax Is Calculated
The total gain on sale is split into two components: (1) Depreciation recapture — the lesser of your total accumulated depreciation or the total gain, taxed at a flat 25%. (2) Capital gain — the remaining gain above the recapture amount, taxed at the long-term capital gains rate (0%, 15%, or 20% depending on your income bracket). Additionally, high-income taxpayers may owe the 3.8% Net Investment Income Tax (NIIT) on the entire gain if their MAGI exceeds $200,000 (single) or $250,000 (MFJ). For example: if you bought a rental for $300,000, claimed $100,000 in depreciation (adjusted basis now $200,000), and sell for $450,000, your total gain is $250,000. The first $100,000 is recapture taxed at 25% ($25,000). The remaining $150,000 is capital gains. Source: IRS Form 4797.
Avoiding Depreciation Recapture with a 1031 Exchange
The most common strategy to defer depreciation recapture is a Section 1031 like-kind exchange. By reinvesting the sale proceeds into another qualifying investment property within strict timeframes (45 days to identify, 180 days to close), you defer both the depreciation recapture tax and the capital gains tax indefinitely. The deferred depreciation carries over to the replacement property's basis. A "swap until you drop" strategy chains 1031 exchanges throughout your lifetime, and your heirs receive a stepped-up basis at death — eliminating the recapture tax entirely. Source: IRS Publication 544.
Depreciation Recapture vs Capital Gains: Key Differences
While both are triggered by selling property at a gain, they are taxed differently. Depreciation recapture is taxed at a flat 25% regardless of your income bracket — there is no 0% or 15% rate for recapture. Capital gains rates depend on your taxable income: 0% for lower brackets, 15% for most middle-income taxpayers, and 20% for the highest bracket ($533,400+ single, $600,050+ MFJ in 2026). The NIIT of 3.8% can apply to both components. Understanding this split is critical for tax planning — strategies like installment sales (spreading gain across multiple years) can keep you in lower capital gains brackets while the recapture portion remains fixed at 25%.