Depreciation Recapture Tax Calculator

About this calculator

When a rental property is sold for more than its depreciated (adjusted) basis, the IRS treats part of the gain as depreciation recapture and taxes it differently from ordinary capital gains. Under Section 1250 rules, the portion of the gain equal to the depreciation previously claimed — the "unrecaptured Section 1250 gain" — is taxed at the taxpayer's ordinary income rate up to a cap of 25%, while any remaining gain above the original purchase price is taxed at standard long-term capital gains rates.

Real estate investors run this calculation before selling a rental property because depreciation, which reduced their taxable income every year they held the property, effectively comes due at sale — a detail many first-time landlords overlook until they see the tax bill. It's also the standard check investors use when deciding whether a 1031 exchange (which defers this tax by rolling gains into a new property) makes more sense than a straight sale.

This calculator takes your purchase price, accumulated depreciation and sale price, and estimates the recapture tax and capital gains tax owed.