Depreciation Recapture Estimator
Estimate depreciation recapture tax on your relinquished property sale. When you sell a rental property, the IRS requires you to recapture depreciation deductions at a higher tax rate. A fully deferred 1031 exchange can defer this recapture tax along with capital gains.
Depreciation Recapture Estimator Inputs
Original purchase price plus improvements
Total depreciation taken over ownership period
Sale price of the relinquished property
Typically 25% for unrecaptured Section 1250 gain (illustrative)
Understanding Depreciation Recapture
Depreciation Recapture: When you sell a rental property, the IRS requires you to "recapture" depreciation deductions you've taken. This recaptured depreciation is taxed at a higher rate (typically 25% for unrecaptured Section 1250 gain) than long-term capital gains.
How It Works: The amount subject to recapture is the lesser of: (1) the total depreciation you've taken, or (2) your total gain on the sale. Even in a 1031 exchange, depreciation recapture may still apply if boot is received.
1031 Exchange Impact: A fully deferred 1031 exchange can defer depreciation recapture along with capital gains. However, if you receive boot (cash or mortgage relief), a portion of the recapture may be recognized.
Important: Actual tax rates vary based on your income bracket, property type, and other factors. Consult a tax advisor for precise calculations.
Educational content only. Not tax, legal, or investment advice. Results are estimates only. Consult a qualified intermediary and tax advisor before making decisions. Colorado does not impose a state real estate transfer tax. Recording fees and title insurance premiums still apply.