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Depreciation Recapture Calculator

Free depreciation recapture calculator: estimate unrecaptured Section 1250 tax at up to 25%, long-term capital gain, NIIT and state tax on a property sale.

When you sell rental or commercial real estate, the depreciation you deducted is taxed before the rest of your gain. Adjusted basis is your purchase price plus capital improvements minus depreciation taken; total gain is the sale price net of selling costs minus that basis. The portion of gain equal to prior depreciation is unrecaptured Section 1250 gain, taxed federally at a maximum 25% rate. Gain above your original basis is long-term capital gain at 0%, 15% or 20%, and the 3.8% Net Investment Income Tax may apply.

Adjusted basis = Purchase price + Improvements − Depreciation taken Total gain = (Sale price − Selling costs) − Adjusted basis Unrecaptured §1250 gain = lesser of depreciation taken or total gain → up to 25% Long-term capital gain = Total gain − Unrecaptured §1250 gain → 0% / 15% / 20% Total tax = §1250 tax + Long-term gain tax + 3.8% NIIT (if applicable) + state tax

The figures below are an estimate for educational purposes. Confirm your own numbers with your CPA or tax advisor before acting.

Estimated total tax —

Estimate for educational purposes only, based on the figures below. Confirm your own numbers with your CPA or tax advisor before acting.

Property Sale Details

Enter your figures to estimate depreciation recapture and total tax on the sale.

How Your Estimated Gain Splits

Estimates only, based on the figures you entered.

Adjusted Basis
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Net Sale Proceeds
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Estimated Total Gain
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Unrecaptured §1250 Portion
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Long-Term Capital Gain Portion
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Your Estimated Tax

§1250 Recapture Tax
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Long-Term Capital Gains Tax
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NIIT (3.8%)
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State Tax
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Total Estimated Tax
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An estimate only. Confirm with your CPA before acting.
Disclaimer: This calculator provides estimates only and is not tax, legal, or investment advice. It assumes Section 1250 real property held longer than one year, straight-line depreciation, and a single sale in one tax year. It does not model Section 1245 recapture on personal property, passive activity losses, installment sales, alternative minimum tax, or partnership-level adjustments. State rates shown are approximate top marginal rates. Real estate involves risk, including possible loss of principal. Confirm your figures with your CPA or tax advisor.

How Depreciation Recapture Is Calculated

Depreciation is a deduction, not a permanent exclusion. Every year you deduct it, your adjusted basis in the property falls, which means a larger gain when you sell. At sale, the tax code separates that gain into two pieces and taxes them differently.

  1. Adjusted basis. Original purchase price, plus capital improvements, minus every dollar of depreciation you deducted (or were allowed to deduct — the rules apply whether or not you actually claimed it).
  2. Total gain. Sale price minus selling costs such as commissions and closing fees, minus adjusted basis.
  3. Unrecaptured §1250 gain. The portion of total gain equal to the depreciation taken, up to the amount of the gain. Taxed at a maximum federal rate of 25% — or your ordinary marginal rate if that rate is lower.
  4. Long-term capital gain. Whatever remains — the appreciation above your original basis — taxed at 0%, 15% or 20% depending on filing status and taxable income.
  5. NIIT and state. The 3.8% Net Investment Income Tax may apply to the whole gain if modified adjusted gross income exceeds $200,000 single or $250,000 married filing jointly. State income tax, where applicable, is applied on top. See our capital gains tax calculator for a state-by-state view of the capital gain piece.

Every figure this tool produces is an estimate for educational purposes. Your actual liability depends on facts this page cannot see. Confirm the numbers with your CPA before you sign a contract.

Section 1250 vs. Section 1245

This calculator models §1250 real property — buildings and their structural components, which is what most investors are selling.

§1245 property is different. Equipment, fixtures, appliances, land improvements and any component reclassified into a shorter recovery period through a cost segregation study are generally recaptured as ordinary income at your marginal rate, not at the 25% §1250 maximum. If you ran a cost segregation study on the property, part of your recapture will likely be §1245 and taxed higher than this estimate shows. That allocation comes off the study and the depreciation schedules — ask your CPA to split it before relying on any single number.

What Can Change the Outcome

  • 1031 exchange. A properly completed like-kind exchange can defer both the capital gain and the depreciation recapture by carrying them into the replacement property’s basis. Deferred, not forgiven — the recapture follows the basis into the next property.
  • Installment sale. Spreading the sale over multiple tax years can change which brackets apply, though §1250 recapture is generally reported in the year of sale rather than spread.
  • Step-up in basis. Property passing to heirs may receive a basis reset to fair market value at death, which can eliminate built-in gain and recapture for them.
  • Passive activity losses. Suspended losses from the property are generally freed on a fully taxable disposition and may offset part of the gain. This calculator does not model them.
  • Holding period. Property held one year or less does not qualify for long-term rates at all, and the arithmetic above no longer applies.

For the underlying definition, rules and authorities, see the glossary entry on depreciation recapture.

Grace Capital Management is a hybrid RIA that acts in a fiduciary capacity when providing investment advisory services. This page is educational and is not tax, legal, or investment advice. We do not prepare tax returns. Nothing here is a recommendation of any security or strategy. Investing involves risk, including possible loss of principal.

Planning a Property Sale?

Talk through how depreciation recapture fits your situation, alongside your CPA.

Frequently Asked Questions

Common Questions

How is depreciation recapture calculated?
Start with adjusted basis — original purchase price plus capital improvements, minus all depreciation you deducted. Subtract that from the sale price net of selling costs to get total gain. The portion of that gain equal to the depreciation you took is unrecaptured Section 1250 gain, taxed federally at a maximum rate of 25 percent. Any remaining gain above your original basis is long-term capital gain. This calculator estimates each piece; confirm your own figures with your CPA.
What is the depreciation recapture tax rate?
For real property, unrecaptured Section 1250 gain is taxed at a maximum federal rate of 25 percent. If your ordinary marginal rate is below 25 percent, the lower rate applies instead. Personal property under Section 1245 is different — that recapture is taxed as ordinary income at your marginal rate. These are estimates and the treatment depends on your facts, so confirm with your CPA.
What is unrecaptured Section 1250 gain?
Unrecaptured Section 1250 gain is the part of the gain on real property attributable to prior straight-line depreciation. It is taxed at a maximum federal rate of 25 percent rather than the lower long-term capital gains rate that applies to the rest of the gain. It is reported on the Unrecaptured Section 1250 Gain Worksheet that accompanies Schedule D.
Does the 3.8% Net Investment Income Tax apply to depreciation recapture?
It can. The Net Investment Income Tax is a 3.8 percent federal surtax on net investment income for taxpayers with modified adjusted gross income above $200,000 single or $250,000 married filing jointly. Gain on the sale of investment real estate, including the unrecaptured Section 1250 portion, is generally net investment income. Whether it applies to you depends on your full return.
Can depreciation recapture be deferred?
A properly completed 1031 exchange can defer both the capital gain and the depreciation recapture by carrying the deferred amounts into the replacement property’s basis. The recapture is postponed, not eliminated, until a future taxable sale. A step-up in basis at death may eliminate built-in gain and recapture for heirs. Both depend on strict rules and facts that vary by taxpayer — review them with your CPA and attorney.
What is the difference between Section 1250 and Section 1245 recapture?
Section 1250 governs real property such as buildings, where depreciation is generally recaptured as unrecaptured Section 1250 gain at a maximum 25 percent federal rate. Section 1245 governs personal property such as equipment, fixtures and assets reclassified through cost segregation, where recapture is taxed as ordinary income at your marginal rate. This calculator focuses on Section 1250 real property.
Does Texas tax depreciation recapture?
No. Texas has no state income tax, so there is no state-level tax on the gain or the recapture portion. Investors in states with an income tax generally owe state tax on the full gain. The state selector above applies an approximate top marginal rate for comparison only.

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