39-year straight line
Commercial buildings depreciate over 39 years (versus 27.5 for residential). The annual deduction is smaller, but over a long hold it still adds up to substantial accumulated depreciation.
Same 25% recapture
At sale, the depreciation you claimed is recaptured as unrecaptured Section 1250 gain, taxed at up to 25% — the same cap that applies to residential.
Cost segregation complicates it
Commercial owners often use cost segregation, which creates Section 1245 components recaptured at ordinary rates. Model both pieces before selling.
Frequently asked questions
How long do you depreciate commercial property?
39 years, straight line.
Is commercial recapture also capped at 25%?
Yes for the Section 1250 real-property portion. Cost-segregated 1245 components can be recaptured at ordinary rates.
Sources
- IRS Topic No. 409 — Capital Gains and Losses
- IRS Publication 544 — Sales and Other Dispositions of Assets
- IRS Publication 946 — How to Depreciate Property
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.