Depreciation Recapture Calculator
Estimate the depreciation recapture tax owed when you sell a rental or investment property. Use it before closing to avoid surprise IRS bills on accumulated depreciation deductions.
Last updated: September 2026
Formula below · 2 sources (CFPB, Wikipedia) · Updated Sep 2026
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About this calculator
When you own rental property, the IRS lets you deduct depreciation each year on the building and improvements (never the land): 1/27.5 of the depreciable basis for residential property or 1/39 for commercial. When you sell, the gain attributable to that depreciation (unrecaptured Section 1250 gain) is taxed at a maximum 25% rate. The calculator first finds accumulated depreciation: (Purchase Price − Land Value + Improvements) ÷ recovery period × years owned, capped at the depreciable basis. Your total gain is the sale price minus your adjusted basis (purchase price + improvements − accumulated depreciation). Recapture applies to the smaller of accumulated depreciation and the total gain, so even a property that sells for less than you paid can owe recapture. Tax = min(depreciation, total gain) × 25%. The rest of the gain (sale price above purchase price + improvements) is long-term capital gain, taxed separately at 0–20%. This uses full years of depreciation (no mid-month convention), the full 25% maximum rate, and the sale price you enter as net of selling costs.
How to use
Suppose you bought a residential rental for $200,000, of which $40,000 was land, spent $20,000 on improvements, owned it for 8 years, and sold it for $280,000. Depreciable basis = $200,000 − $40,000 + $20,000 = $180,000. Annual depreciation = $180,000 / 27.5 ≈ $6,545; over 8 years ≈ $52,364. Adjusted basis = $220,000 − $52,364 = $167,636, so the total gain is $112,364. Since $52,364 < $112,364, the full $52,364 is recaptured: tax = $52,364 × 0.25 ≈ $13,091. The remaining $60,000 of gain is taxed as a long-term capital gain.
Frequently asked questions
What is depreciation recapture and how does it differ from capital gains tax?
Depreciation recapture is the IRS mechanism that taxes back the depreciation deductions you claimed during ownership of a rental property. While long-term capital gains are typically taxed at 0%, 15%, or 20% depending on your income, depreciation recapture is taxed at a flat maximum rate of 25%. They apply to different portions of your profit: recapture applies to gains attributable to depreciation taken, while capital gains tax applies to any additional appreciation above your original purchase price. Both taxes can be owed in the same year you sell the property.
How can I reduce or defer depreciation recapture tax when selling rental property?
The most common strategy is a 1031 like-kind exchange, which lets you defer both capital gains and depreciation recapture by rolling proceeds into a new investment property within strict IRS deadlines. Investing the gain in a Qualified Opportunity Zone fund is another deferral option. Installment sales spread the recapture tax over multiple years, which may reduce your effective rate. You cannot permanently eliminate recapture on a standard sale — only defer it.
Does depreciation recapture apply to your primary residence or only investment property?
Depreciation recapture applies only when you have actually claimed depreciation deductions, which is generally limited to rental, investment, or business-use property. If you never rented or used your home for business, no depreciation was taken and no recapture applies. However, if you converted a primary residence to a rental and claimed depreciation before selling, that accumulated depreciation is fully subject to recapture at 25%, even if the rest of the gain qualifies for the primary-residence exclusion under Section 121.