Depreciation Recapture Calculator
A building, cost-segregated equipment, and land can produce different gain categories. See the split before applying illustrative rates.
Book a free consultationAllocate a taxable cash sale
Example amounts are prefilled. Enter net proceeds after allocable selling costs, before mortgage payoff. Combine improvements into basis once. Use separate rows for separate depreciable assets; add more rows as needed. Confirm classifications from your depreciation schedule.
Rates for the illustration
Your calculation
- Total sale gain
- $370,000
- Section 1245 ordinary recapture
- $50,000
- Unrecaptured Section 1250 gain
- $120,000
- Remaining gain before Section 1231 netting
- $200,000
- Selected-rate illustration, not total tax
- $76,000
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Educational estimate, updated September 29, 2026. Educational, not individualized tax advice. Taxable cash sale; assets held over one year; straight-line building depreciation; no Section 1231 lookback or loss netting. User-supplied allocation and rates; enter each depreciable asset separately, rather than netting several asset gains together. Remaining gain assumes eligibility for long-term Section 1231 treatment. Selected-rate illustration only; excludes income stacking, NIIT, state tax, Section 121, 1031 exchanges, installment sales, and accelerated building depreciation.
Start with the asset schedule, not a flat 25% rate
This calculator separates gain by tax character for a simplified taxable cash sale. It is useful for a rental-property exit or a cost-segregation discussion. It does not prepare Form 4797 or calculate your complete federal liability.
- STEP 01
Allocate the sale consistently
Use a supportable allocation of net sale proceeds across the building, Section 1245 assets, and land. Subtract allocable selling costs before entering proceeds. Tax basis includes capitalized improvements once; subtract all depreciation allowed or allowable. Your closing statement alone may not contain the needed asset-level allocation.
- STEP 02
Read the three gain categories
Section 1245 recapture is limited to the lesser of asset gain or its depreciation adjustments in this model. Straight-line building depreciation can produce unrecaptured Section 1250 gain subject to a maximum 25% rate. Remaining Section 1231 gain receives long-term treatment only after the applicable holding-period and netting rules are satisfied.
- STEP 03
Carry the result into the exit decision
The selected-rate illustration treats each category at the rate you enter. It omits income stacking, other gains and losses, the five-year Section 1231 lookback, NIIT, and state taxes. A 1031 exchange, installment sale, mixed personal use, or accelerated building depreciation needs a separate analysis rather than this cash-sale result.
Worked sale example
Illustrative allocations, not client results. Each asset is held over one year; no loss netting or lookback applies.
Swipe horizontally to compare
| Asset | Net proceeds | Basis before depreciation | Depreciation | Gain character |
|---|---|---|---|---|
| Building | $600,000 | $450,000 | $120,000 | $120,000 unrecaptured 1250 + $150,000 remaining gain |
| Section 1245 assets | $60,000 | $80,000 | $70,000 | $50,000 ordinary recapture |
| Land | $200,000 | $150,000 | $0 | $50,000 remaining gain |
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Authoritative Sources
- IRS Publication 544: depreciation recapture and Section 1231
- IRS Publication 551: adjusted basis
- IRS Topic 409: capital gains tax rates
Citations reflect U.S. federal tax law as of the article's last reviewed date.
Frequently asked questions
Is all depreciation recapture taxed at 25%?
No. Section 1245 recapture is ordinary income. The 25% rate is a maximum for unrecaptured Section 1250 gain, and a lower rate can apply. This tool lets you select an illustrative building-gain rate rather than promising a flat tax.
Does cost segregation change the sale calculation?
It can. A study may create separately classified assets whose gain is subject to Section 1245 ordinary recapture. Enter the asset classifications from the depreciation schedule; the calculator does not classify components or value them.
What if I did not claim depreciation?
Basis generally must reflect depreciation allowed or allowable. Leaving missed depreciation out can overstate basis and understate gain. Correcting past deductions is a separate return-preparation question.
Can I enter a loss on one asset?
The tool stops combined results when an asset has a loss because Section 1231 and other netting rules may change the gain character. It does not convert a loss into zero and pretend the other assets determine the full tax.
How is a loan payoff treated?
A mortgage payoff changes cash received after closing, but it does not itself reduce gain in a taxable cash sale. Use net sale proceeds before paying off the loan.
Can this estimate a 1031 exchange?
Use the separate 1031 exchange calculator for a supported real-property exchange. This model assumes a taxable cash sale and excludes exchange, installment, related-party, and home-exclusion rules.
Related services and resources
Depreciation recapture guide
Understand Section 1245, Section 1250, and sale character.
ExplorePartial 1031 exchange calculator
Compare current recognition with gain carried into replacement property.
ExploreNIIT scenario calculator
Model the separate 3.8% layer with correctly classified investment income.
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A property sale or exchange approaching?
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