Depreciation Recapture Tax Rate

The tax rate on accumulated depreciation when the property is sold.

Example Result

Sample Data

25.00%

Based on a sample $385,000 property with $2,850/month rent, 20% down, 7% interest rate.

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Depreciation Recapture Tax Rate Formula

User Input (%)

User Input (%)

25.00%

Where to Find This Value

Here's where you can find the value for Depreciation Recapture Tax Rate:

CPA / Accountant

Your accountant can confirm the applicable recapture rate for your situation

IRS Publication 544

Currently 25% for Section 1250 property (residential rental buildings)

Why It Matters

Depreciation provides valuable annual tax savings, but the IRS collects back when you sell. Recapture tax can be a significant surprise for investors who haven't planned for it. A 1031 exchange defers both capital gains and depreciation recapture tax, making it the most common exit strategy for investment properties.

Detailed Explanation

Depreciation Recapture Tax Rate is the tax rate applied to the total depreciation deductions you claimed during ownership when you sell the property. The IRS "recaptures" these deductions at a maximum federal rate of 25% — regardless of your regular income tax bracket. If you claimed $50,000 in depreciation and sell, you owe up to $12,500 in recapture tax on top of any capital gains tax.