United States · Selling depreciated property · 2026
Depreciation recapture calculator.
Selling a rental building or business equipment hands back the depreciation you took. Enter the sale and your depreciation to split the gain into the recaptured part and the rest, and to see the federal tax on each under the 2026 rules.
A single owner with $60,000 of other taxable income who sells a rental for $450,000 ($27,000 selling costs) after depreciating a $320,000 cost basis by $80,000 has a $183,000 gain. The $80,000 of unrecaptured section 1250 gain is taxed at ordinary rates here, and the total federal tax is about $33,736. With $180,000 of other income, the 25% cap applies to $58,225 of it.
Your numbers
Your result
How this is calculated
- Gain. Amount realized (sale price minus selling costs) minus adjusted basis (cost minus depreciation allowed or allowable). If it is zero or less there is no recapture (Pub. 544).
- Recaptured part. The smaller of the gain or the depreciation. For section 1245 property this is ordinary income. For section 1250 real property held over a year with straight-line depreciation it is unrecaptured section 1250 gain, taxed at no more than 25%.
- The 25% is a ceiling. Under the Schedule D Tax Worksheet, the part of unrecaptured section 1250 gain that falls within brackets up to 24% is taxed at those ordinary rates, and only the part above the 24% bracket ceiling is taxed at 25%.
- The rest. Any gain above the depreciation is long-term gain taxed at 0%, 15% or 20%, using the 2026 breakpoints in Rev. Proc. 2025-32, stacked on top of everything else.
- Tax. Tax with the sale minus tax without it, split into the recapture layer and the remaining gain.
Worked example: single filer, $60,000 other taxable income
| Line | Amount |
|---|---|
| Sale price minus selling costs | $423,000 |
| Cost basis minus depreciation (adjusted basis) | $240,000 |
| Total gain | $183,000 |
| Unrecaptured section 1250 gain (depreciation taken) | $80,000 |
| Remaining long-term gain | $103,000 |
| Tax on the recaptured part (22% and 24% brackets) | $18,286 |
| Tax on the remaining gain at 15% | $15,450 |
| Total federal tax on the sale | $33,736 |
Raise other taxable income to $180,000 and the same sale costs $35,232: the recapture layer now crosses the $201,775 ceiling of the 24% bracket, so $58,225 of it is taxed at 25% and $21,775 at ordinary rates. A section 1245 example: equipment bought for $50,000, depreciated by $35,000 and sold for $30,000 has a $15,000 gain, all of it ordinary income because it is not more than the depreciation.
What this does not cover
- The 3.8% net investment income tax and state tax on the gain. See the linked net investment income tax calculator.
- Prior-year section 1231 losses that recharacterize gain as ordinary, passive activity loss carryforwards and the alternative minimum tax.
- Accelerated depreciation on real property (additional depreciation under section 1250), collectibles taxed at 28%, and section 1202 stock.
- Installment sales, like-kind exchange rules, partial business use, casualty adjustments and sales to related persons.
- The sale of a main home with a part used for business, where the home sale exclusion and its depreciation rules interact.
Method and assumptions
Gain and recapture follow Publication 544 chapter 3. The layering of ordinary income, unrecaptured section 1250 gain and 0/15/20% gain follows the Schedule D Tax Worksheet, using the 2026 brackets and breakpoints from Rev. Proc. 2025-32. The tool assumes the property was held more than one year and used entirely in a rental or business, and that you enter taxable income before this sale. Use it to estimate; the return itself goes on Form 4797 and Schedule D.
Results vary with your actual income, deductions, credits and filing situation. This page uses the figures you enter and published IRS rules; it does not predict what you will earn or owe. This is general information, not tax, legal or accounting advice; confirm your own situation against the linked IRS instructions or with a qualified preparer. Nothing here collects or stores personal data.
Sources
- IRS Publication 544, Sales and Other Dispositions of Assets, retrieved October 26, 2026
- IRS Instructions for Schedule D (Form 1040), Schedule D Tax Worksheet, retrieved October 26, 2026
- IRS Instructions for Form 4797, Sales of Business Property, retrieved October 26, 2026
- IRS Rev. Proc. 2025-32 (2026 brackets, standard deduction, capital gains breakpoints), retrieved October 26, 2026
- IRS Publication 527, Residential Rental Property, retrieved October 26, 2026
Cite this page: TNAADO Tools, "Depreciation recapture calculator," tools.tnaado.ca/us/depreciation-recapture-calculator/, figures retrieved October 2026.
Common mix-ups
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Often assumedSince I never claimed depreciation on my rental, nothing gets recaptured when I sell.
What the source saysPublication 544 measures recapture by depreciation allowed or allowable. Depreciation you could have claimed but did not still counts, so skipping the deduction does not avoid the tax. [1]
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Often assumedDepreciation recapture on real estate is taxed at a flat 25%.
What the source saysPublication 544 gives 25% as a maximum rate. The Schedule D Tax Worksheet taxes the part of unrecaptured section 1250 gain that falls in brackets up to 24% at those ordinary rates and only the rest at 25%. [2]
- IRS Publication 544, Sales and Other Dispositions of Assets
- IRS Instructions for Schedule D (Form 1040), Schedule D Tax Worksheet
Checked against these sources on .
Frequently asked questions
What is depreciation recapture?
When you sell depreciable property at a gain, part of the gain is treated differently because you already deducted depreciation. Publication 544 says gain on section 1245 property is ordinary income up to the depreciation allowed or allowable.
What is unrecaptured section 1250 gain?
Generally the part of long-term gain on real property that is due to depreciation. Publication 544 says it cannot be more than the net section 1231 gain, and it is taxed at a maximum rate of 25%.
Is the 25% rate a flat rate on my depreciation?
No, it is a maximum. The Schedule D Tax Worksheet taxes the part that falls inside ordinary brackets up to the 24% ceiling at those lower rates. Only the part above that is taxed at 25%.
What if I never claimed depreciation?
Publication 544 uses depreciation allowed or allowable. Depreciation you could have claimed but did not still reduces your basis and is recaptured, so skipping it does not avoid the tax.
Where do I report the sale?
Business property is reported on Form 4797, and the instructions say to identify unrecaptured section 1250 gain and report it on Schedule D.
Not tax advice
This is an educational estimate built from the numbers you enter and published IRS rules. It is not tax advice and does not predict what you will earn or owe. Need the depreciation total first? Use the rental property depreciation calculator.