Form 4797 is the starting point
The sale of business or rental real estate is reported on Form 4797, Sales of Business Property, not directly on Schedule D. Part III of the form handles the gain and separates the depreciation-recapture portion from the rest.
How the gain splits
Part III calculates your total gain, then routes the unrecaptured Section 1250 amount to the 28%/25% worksheet and the remaining long-term gain to Schedule D. The recapture piece is taxed at up to 25%; the rest at your capital gains rate.
Keep your depreciation schedule
You'll need the total depreciation claimed over the years — from your prior returns or your accountant's depreciation schedule — to compute recapture correctly. Estimate the amount first so nothing surprises you at filing.
Frequently asked questions
What form reports depreciation recapture?
IRS Form 4797, Part III, for real estate; the amounts then flow to Schedule D and the tax worksheets.
Is recapture on Schedule D?
The sale starts on Form 4797; the long-term gain portion carries to Schedule D, while recapture is taxed via the 25% worksheet.
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.