The catch when you sell
Every year you owned the rental, depreciation reduced your taxable income and your adjusted basis. At sale, that lower basis means a larger taxable gain — and the part of the gain equal to depreciation you claimed is taxed as unrecaptured Section 1250 gain at up to 25%.
A quick example
Buy at $300,000, claim $50,000 depreciation, sell at $400,000. Adjusted basis is $250,000, total gain $150,000. The first $50,000 is recaptured at 25% ($12,500); the remaining $100,000 is a long-term capital gain (at 15%, $15,000). Total: $27,500. Run your own numbers in the calculator below.
You owe it even if you skipped depreciation
The IRS taxes recapture on depreciation "allowed or allowable" — meaning you owe it on what you could have deducted, whether you claimed it or not. So there's no benefit to skipping depreciation.
Frequently asked questions
How much is depreciation recapture when selling a rental?
The depreciation you claimed is taxed at up to 25%; gain above that is taxed at your long-term capital gains rate.
Can I avoid it when selling?
You can defer it with a 1031 exchange or eliminate it via a step-up in basis at death. See our guide on avoiding recapture.
What if I sell at a loss?
No gain means no recapture — recapture only applies to gain, up to the depreciation claimed.
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.