Depreciation Recapture CalculatorRental property recapture tax on Section 1250 and Section 1245 gain, with cost segregation, bonus depreciation and 2026 tax brackets
When you sell a rental or commercial property, the depreciation you claimed (or could have claimed) comes back as taxable gain. This calculator works out your depreciation year by year, splits your gain into its three tax layers and shows exactly what you’ll owe. It also shows whether depreciation was still worth it, and how to defer or avoid the recapture tax.
By Manzoor Ahmad · 13+ years of web development & SEO experienceUpdated October 21, 2026 · 2026 brackets and 2025 bonus rules
Property type
Purchase —
Improvements & cost segregation
Sale —
Your taxes 2026
—
Was depreciation worth it?
Depreciation cut your taxes every year you owned the property. Recapture takes part of that back when you sell.
Ways to defer or avoid it
What happens to your recapture tax under each strategy, using your numbers.
Show your year-by-year depreciation schedule
Straight-line MACRS with the mid-month convention for the building and improvements. Cost-segregation assets use the 5-year MACRS table (half-year convention), with bonus depreciation at the rate in effect when they were placed in service.
| Year | Building | Improvements | Cost-seg assets | Total | Cumulative |
|---|
What is depreciation recapture?
Depreciation recapture is the tax you pay, when you sell a rental or business property at a gain, on the depreciation deductions you took while you owned it. For real estate the recaptured amount, called unrecaptured Section 1250 gain, is taxed at your ordinary rate but no more than 25%. Personal property and cost-segregation components (Section 1245) are recaptured at full ordinary rates, up to 37%.
Adjusted basis = purchase price + closing costs + improvements − depreciation
Total gain = (sale price − selling costs) − adjusted basis
Recapture = the smaller of total gain or depreciation taken
Anything above the recaptured amount is a long-term capital gain taxed at 0%, 15% or 20%. The 3.8% net investment income tax can apply to all of it.
Worked example (the default inputs)
The three layers of a rental property gain
The IRS taxes your gain in a set order. Recapture comes off the top first, so if your gain is smaller than your depreciation, all of it is taxed as recapture.
Depreciation on personal property and the 5-, 7- and 15-year assets from a cost segregation study. Taxed as ordinary income, including any bonus depreciation.
Straight-line depreciation on the building and structural improvements. Taxed at your ordinary rate, capped at 25%.
Appreciation above your original cost. Taxed at long-term rates if you owned the property for more than a year.
| Your 2026 taxable income (joint) | §1250 recapture rate | Capital gain rate |
|---|---|---|
| Up to $24,800 | 10% | 0% |
| $24,801 – $100,800 | 12% | 0% to $98,900, then 15% |
| $100,801 – $211,400 | 22% | 15% |
| Over $211,400 | 25% (cap) | 15%; 20% over $613,700 |
Because recapture is stacked on top of your other income, a large sale can push part of it into the 24% bracket and the rest to the 25% cap. The calculator stacks every layer in order, which is why it’s more accurate than multiplying your depreciation by 25%.
“Allowed or allowable”: you pay recapture even if you never claimed depreciation
The IRS reduces your basis by the depreciation you were entitled to, whether or not you claimed it. Landlords who skipped depreciation still owe recapture on the full allowable amount when they sell, without ever having received the deduction. If that’s you, a CPA can usually claim all the missed depreciation in one year by filing Form 3115 (change in accounting method) before or in the year of sale. Enter what you actually claimed in the calculator to see the deductions you’re missing.
Bonus depreciation and cost segregation recapture
The 2025 tax law permanently restored 100% bonus depreciation for qualifying property acquired and placed in service after January 19, 2025. A cost segregation study can reclassify 15%–30% of a building’s cost into 5-, 7- and 15-year assets and deduct them in the first year. The catch: those components are Section 1245 property, so their depreciation is recaptured at ordinary rates up to 37%, not the 25% cap.
| Placed in service | Bonus depreciation rate |
|---|---|
| Sept 28, 2017 – 2022 | 100% |
| 2023 | 80% |
| 2024 | 60% |
| Jan 1 – Jan 19, 2025 | 40% |
| After Jan 19, 2025 (permanent) | 100% |
Cost segregation still usually wins, because you get the deductions years earlier and can defer the recapture with a 1031 exchange. Just budget for it if you plan to sell for cash. Also note that bonus-depreciated assets aren’t always matched by the replacement property in an exchange, which can trigger recapture even in a 1031.
How to avoid or reduce depreciation recapture
| Strategy | Effect on recapture | Watch out for |
|---|---|---|
| 1031 exchange | Defers all of it when you buy like-kind real estate of equal or greater value | Boot is taxed as recapture first; strict 45/180-day deadlines |
| Hold until death | Heirs get a stepped-up basis, eliminating the deferred gain and recapture | Depends on current estate tax law |
| Installment sale | Spreads §1250 gain over the years you’re paid | §1245 recapture is all taxed in the year of sale |
| Harvest losses | Suspended passive losses and capital losses offset the gain | Capital losses offset ordinary income only up to $3,000 |
| Move in first | The home-sale exclusion can cover appreciation | Depreciation after May 6, 1997 is still recaptured; nonqualified use rules apply |
| Sell in a low-income year | Recapture is taxed at your ordinary rate, so lower income means a lower rate | Only helps below the 25% cap |
To model a tax-deferred swap in detail, including boot and your new basis, use the 1031 exchange calculator. For the complete sale picture, including the home-sale exclusion and short-term gains, use the real estate capital gains tax calculator.
Six recapture mistakes landlords make
- Skipping depreciation to “avoid” recaptureIt doesn’t work: recapture uses allowable depreciation, so you lose the deduction and pay anyway.
- Depreciating the landOnly the building and improvements are depreciable. Use your tax assessment or an appraisal to split the price.
- Using 25% as a flat rate25% is a cap. If your income is lower, recapture can be taxed at 10%, 12% or 22%.
- Forgetting the 3.8% NIITHigher earners owe net investment income tax on recapture and capital gain alike.
- Ignoring cost-seg recaptureBonus-depreciated components are recaptured at ordinary rates up to 37%.
- Not budgeting at listingRecapture comes out of your proceeds. Estimate it with the seller net proceeds calculator before you set a price.
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Depreciation recapture questions
How is depreciation recapture calculated?
Find your adjusted basis (cost plus improvements minus depreciation) and your gain (net sale price minus adjusted basis). The recaptured amount is the smaller of your gain or the depreciation you took or could have taken; it’s taxed before any capital gain.
What is the depreciation recapture tax rate in 2026?
For real estate (unrecaptured Section 1250 gain), your ordinary income rate up to a maximum of 25%. For Section 1245 property, including cost-segregation components, your full ordinary rate up to 37%. The 3.8% NIIT may also apply.
Do I pay depreciation recapture if I sell at a loss?
No. Recapture only applies to a gain. If you sell for less than your adjusted basis, you have a Section 1231 loss, which is generally deductible against ordinary income.
What if I never claimed depreciation?
You still owe recapture on the depreciation you were allowed to take. You may be able to catch up the missed deductions with Form 3115 before you sell.
How can I avoid depreciation recapture?
Defer it with a 1031 exchange, or hold the property until death so heirs receive a stepped-up basis. Installment sales, offsetting losses and selling in a low-income year can reduce it.
Does a 1031 exchange defer depreciation recapture?
Yes, when you fully reinvest in like-kind real estate. Any boot you receive is taxed, and recapture is taxed first.
Is depreciation recapture taxed if I move into my rental?
Yes. Even if the home-sale exclusion covers your appreciation, depreciation claimed after May 6, 1997 is still recaptured when you sell.
What is unrecaptured Section 1250 gain?
The part of your gain equal to the straight-line depreciation on real property. It’s reported on Schedule D and taxed at a maximum 25% rate.
How does cost segregation affect recapture?
Components reclassified to 5-, 7- or 15-year property are Section 1245 assets, recaptured at ordinary rates up to 37%, including any bonus depreciation.
Which form reports depreciation recapture?
Form 4797, Sales of Business Property, with the unrecaptured Section 1250 gain carried to the Schedule D worksheet.
Is depreciation worth it if I pay it back?
Usually yes. You deduct it at your full rate for years, often 22%–37%, and repay it later at no more than 25% on real property. You also get use of the money in the meantime, and you may never repay it if you exchange or hold until death.
Is this depreciation recapture calculator free and private?
Yes. It’s free, needs no sign-up and runs entirely in your browser; nothing you enter is sent to or stored by DexoCalc.
Manzoor Ahmad
13+ years of web development & SEO experience · Founder, DexoCalc
Manzoor builds and maintains every DexoCalc calculator, including the full property and tax libraries. This calculator builds a MACRS schedule from your dates, stacks Section 1245, unrecaptured Section 1250 and capital gain layers on your income using the 2026 brackets, and adds NIIT and state tax, matching the order the IRS uses on Form 4797 and the Schedule D worksheet.
Sources
- IRS Publication 544 — Sales and Other Dispositions of Assets (recapture)
- IRS Publication 527 — Residential Rental Property (depreciation)
- IRS Publication 946 — How to Depreciate Property (MACRS tables)
- CBIZ — Cost segregation and 100% bonus depreciation under the 2025 law
- EisnerAmper — Depreciation recapture in real estate
- 2026 capital gains brackets and NIIT thresholds (Rev. Proc. 2025-32)
This calculator gives a planning estimate, not tax advice. It assumes MACRS straight-line for real property, the 5-year table for cost-segregation assets and the standard deduction, and allocates recapture to cost-seg assets before the building. It doesn’t model passive loss carryovers, AMT, partial dispositions or state-specific rules. Confirm with a CPA before you sell.