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Depreciation recapture calculator (rental property)

Selling a rental? The depreciation you claimed (or could have claimed) lowers your basis and is taxed at up to 25% when you sell. Estimate the bill here.

Estimated tax on sale

Amount realized–

Adjusted basis–

Total gain–

Unrecaptured §1250 gain–

Rate on that portion–

Tax on §1250 portion–

Remaining capital gain–

Capital gains tax–

NIIT–

State tax–

Cash after tax (before paying off the loan)–

Estimated total tax–

How the estimate works

Adjusted basis = original basis + improvements − depreciation
Gain = (sale price − selling costs) − adjusted basis
Unrecaptured §1250 gain = the smaller of the gain and the depreciation → taxed at your ordinary rate, but no more than 25%
Remaining gain → long-term capital gains rate (0%, 15% or 20%)

Example (defaults): bought for $250,000, claimed $60,000 of depreciation, sold for $400,000 with $24,000 of selling costs. The adjusted basis is $190,000 and the gain is $186,000. The first $60,000 is unrecaptured §1250 gain taxed at 25% ($15,000), and the other $126,000 is taxed at 15% ($18,900), so about $33,900 of federal tax before NIIT or state tax.

Things people miss

"Allowed or allowable." The IRS reduces your basis by the depreciation you were entitled to claim, even if you never claimed it. Skipping depreciation doesn't avoid recapture.
Improvements and appliances depreciated over 5, 7 or 15 years can be §1245 property, recaptured as ordinary income. This estimate treats all depreciation as §1250.
A 1031 exchange can defer both the gain and the recapture when you buy a replacement property under the exchange rules.
Losses. If you sell for less than your adjusted basis, there's no recapture tax.

Need the depreciation figure? Use the 27.5-year depreciation calculator for each year you owned the property. IRS references: Publication 544 (Sales and Other Dispositions of Assets), Publication 527, and the Unrecaptured Section 1250 Gain Worksheet in the Schedule D instructions.

A simplified estimate, not tax advice. Real returns depend on your total income, filing status, passive losses carried forward, installment sales, state rules and more. Have a tax professional review any sale.

Related calculators

Depreciation (27.5-yr)Mid-month schedule for Schedule E line 18.ROI & IRR calculatorHold-and-sell projection with IRR and equity multiple.Cap rate calculatorNOI ÷ price, plus value at a target cap rate.

FAQ

What is depreciation recapture on a rental property?

When you sell, the gain caused by depreciation you claimed (or could have claimed) on the building is 'unrecaptured Section 1250 gain', taxed at your ordinary rate up to a maximum of 25%, instead of the lower capital-gains rate.

Can I avoid depreciation recapture?

You can't avoid it by skipping depreciation, because the IRS uses depreciation 'allowed or allowable'. A 1031 exchange can defer it, and it may not apply if you sell at a loss. Ask a tax professional about your options.

Is the 3.8% NIIT included?

Only if you enter it. The net investment income tax applies to some or all of the gain if your modified adjusted gross income is above the threshold for your filing status.