Estimate the tax when you sell depreciated property. The calculator rebuilds your adjusted basis, splits the gain into the depreciation recapture part (unrecaptured Section 1250 gain taxed at up to 25% for real estate, ordinary income for equipment) and the remaining capital gain, and adds NIIT and state tax.
Last updated:
Property sold
Purchase & depreciation
$
Including land and closing costs added to basis.
$
$
Total from your Forms 4562 / Schedule E, including any you could have claimed.
Sale
$
$
Commissions, title, transfer taxes.
Your tax rates
MAGI over $200,000 single / $250,000 joint (not for real estate professionals).
%
Enter your values to see the result.
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How to use the Depreciation Recapture Calculator
Choose the property type: real estate or equipment.
Enter the purchase price, improvements and total depreciation taken (or allowable).
Enter the sale price and selling costs, and whether you owned it over a year.
Pick your ordinary bracket and capital gains rate; add NIIT and state tax if they apply.
Calculate to see the recapture amount, the capital gain and the total tax.
How depreciation recapture is calculated
Adjusted basis = purchase price + capital improvements − depreciation allowed or allowable.
Amount realized = sale price − selling costs.
Gain = amount realized − adjusted basis.
Recapture portion = the smaller of the gain or total depreciation.
Tax = recapture × recapture rate + (gain − recapture) × capital gains rate, plus NIIT and state tax if they apply.
Section 1250 vs Section 1245
Real property (§1250)
Personal property (§1245)
Examples
Rental houses, apartment and office buildings
Machinery, vehicles, computers, furniture, appliances in a rental
Recapture amount
Gain up to the straight-line depreciation taken
Gain up to all depreciation, Section 179 and bonus taken
Federal rate on that part
Ordinary rate, capped at 25%
Ordinary rate, up to 37%
Rest of the gain
0% / 15% / 20% long-term rates
0% / 15% / 20% long-term rates (§1231)
Form
Form 4797 and Schedule D worksheet
Form 4797, Part III
Worked example
A rental bought for $300,000 with $20,000 of improvements and $80,000 of depreciation has an adjusted basis of $240,000. Sold for $450,000 with $27,000 of selling costs, the amount realized is $423,000 and the gain is $183,000. The first $80,000 is unrecaptured §1250 gain taxed at 24% (the owner's bracket, below the 25% cap) = $19,200, and the remaining $103,000 is taxed at 15% = $15,450, for $34,650 of federal tax before NIIT and state tax.
Planning ideas
1031 exchange: reinvesting in like-kind real property defers both recapture and capital gains.
Time the sale for a lower-income year; recapture on real estate is taxed at your bracket if under 25%.
Keep improvement records: every documented improvement raises the basis and lowers the gain.
Losses: a loss on business or rental property is generally a Section 1231 ordinary loss, not limited to $3,000 a year.
Frequently asked questions
What is depreciation recapture?
When you sell property you depreciated for a profit, the IRS taxes back the benefit of those deductions. The part of the gain equal to the depreciation taken is taxed differently from the rest of the gain: as unrecaptured Section 1250 gain for real estate, or as ordinary income for equipment and other Section 1245 property.
Is depreciation recapture always taxed at 25%?
No. 25% is the maximum rate for unrecaptured Section 1250 gain on real estate. The gain is taxed at your ordinary rate if that is lower, so someone in the 12% or 22% bracket pays 12% or 22% on that portion. For equipment (Section 1245), recapture is ordinary income at your full bracket rate.
How is the recapture amount calculated?
Recapture = the smaller of the total gain or the depreciation allowed or allowable. Gain = sale price − selling costs − adjusted basis, where adjusted basis = purchase price + improvements − depreciation. Any gain above the depreciation is a regular long-term capital gain at 0%, 15% or 20%.
What if I never claimed depreciation on my rental?
Recapture is based on depreciation allowed or allowable, so the IRS treats you as if you took it and taxes the recapture anyway. You can usually catch up missed depreciation by filing Form 3115 (change in accounting method) before selling, rather than losing the deduction.
Does the 3.8% NIIT apply?
Net investment income tax applies to gains on rental property if your modified AGI is over $200,000 (single) or $250,000 (married filing jointly), unless you qualify as a real estate professional with the rental as a non-passive trade or business. Gains on equipment used in an active business are generally not subject to NIIT.
Can I avoid depreciation recapture?
You can defer it with a like-kind exchange under Section 1031 into another investment property, or spread it with an installment sale (although recapture on equipment is due in the year of sale). Heirs who inherit the property get a stepped-up basis, which wipes out the recapture.
What about the home sale exclusion?
The $250,000 / $500,000 exclusion for a main home does not cover depreciation taken after May 6, 1997 for renting the home or a home office. That part of the gain is still taxed as unrecaptured Section 1250 gain.
Are all the tools on FreeToolCabin tested for quality and accuracy?
Yes! Every tool on our site undergoes automated Q/A testing in real browser environments to ensure high precision, correct output, and zero errors. If you happen to spot a bug or have a suggestion, please contact us at [email protected] and our team will review it right away.