{
  "slug": "depreciation-recapture-sale",
  "title": "Depreciation Recapture on Sale Calculator",
  "heading": "Depreciation Recapture Calculator",
  "category": "financial",
  "url": "https://www.revenuelab.fyi/toolbox/depreciation-recapture-sale",
  "summary": "Split your sale gain into recapture tax and long-term capital gains tax.",
  "description": "When you sell rental real estate, the IRS separates your gain into two buckets taxed differently. The portion equal to depreciation you claimed (Section 1250 unrecaptured gain) is taxed at a maximum federal rate of 25%, regardless of your regular capital gains bracket. Any remaining gain above that is taxed at standard long-term capital gains rates — 0%, 15%, or 20% depending on income. This calculator takes your sale price, selling costs, original purchase price plus capital improvements, and total depreciation claimed over the hold period, and splits the total gain accordingly. It's a common surprise for first-time sellers who assume their entire profit gets the lower capital gains rate; in reality, the more years you held and depreciated, the bigger the chunk taxed at the higher 25% recapture rate. State taxes are separate and this tool doesn't include them — most states tax the whole gain as ordinary income with no capital gains preference at all.",
  "formula": "Adjusted basis = Purchase price + improvements − depreciation taken; Total gain = Net sale price − adjusted basis; Recapture gain = min(depreciation taken, total gain), taxed at 25%; Remaining gain taxed at capital gains rate.",
  "dateModified": "2026-09-30",
  "run_url": "https://www.revenuelab.fyi/api/public/calc?tool=depreciation-recapture-sale",
  "inputs": [
    {
      "id": "salePrice",
      "label": "Sale price",
      "kind": "number",
      "hint": null,
      "default": 450000,
      "unit": "$",
      "min": 1,
      "max": null
    },
    {
      "id": "sellingCosts",
      "label": "Selling costs",
      "kind": "number",
      "hint": null,
      "default": 27000,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "purchasePrice",
      "label": "Original purchase price + improvements",
      "kind": "number",
      "hint": null,
      "default": 300000,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "depreciationTaken",
      "label": "Total depreciation claimed",
      "kind": "number",
      "hint": null,
      "default": 65000,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "capGainsRate",
      "label": "Your long-term capital gains rate",
      "kind": "number",
      "hint": null,
      "default": 15,
      "unit": "%",
      "min": 0,
      "max": 20
    },
    {
      "id": "recaptureRate",
      "label": "Recapture tax rate (max 25%)",
      "kind": "number",
      "hint": null,
      "default": 25,
      "unit": "%",
      "min": 0,
      "max": 25
    }
  ],
  "outputs": [
    {
      "id": "totalTax",
      "label": "Total federal tax owed on sale",
      "format": "currency",
      "hint": null,
      "primary": true
    },
    {
      "id": "recaptureTax",
      "label": "Depreciation recapture tax (25%)",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "capitalGainsTax",
      "label": "Long-term capital gains tax",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "totalGain",
      "label": "Total gain on sale",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "netProceedsAfterTax",
      "label": "Net proceeds after federal tax",
      "format": "currency",
      "hint": null,
      "primary": false
    }
  ],
  "worked_example": {
    "inputs": [
      "Sale price: 450000 $",
      "Selling costs: 27000 $",
      "Original purchase price + improvements: 300000 $",
      "Total depreciation claimed: 65000 $",
      "Your long-term capital gains rate: 15 %",
      "Recapture tax rate (max 25%): 25 %"
    ],
    "outputs": [
      "Total federal tax owed on sale: $34,700",
      "Depreciation recapture tax (25%): $16,250",
      "Long-term capital gains tax: $18,450",
      "Total gain on sale: $188,000",
      "Net proceeds after federal tax: $388,300"
    ]
  },
  "how_to": {
    "title": "How to use this",
    "steps": [
      "Enter sale price ($).",
      "Enter selling costs ($).",
      "Enter original purchase price + improvements ($).",
      "Enter total depreciation claimed ($).",
      "Enter your long-term capital gains rate (%).",
      "Enter recapture tax rate (max 25%) (%).",
      "Read your total federal tax owed on sale on the right — it updates as you type.",
      "Hit Share to keep the scenario or send it to someone."
    ]
  },
  "scenarios": [
    {
      "name": "Conservative",
      "description": "Lower-end numbers — what if things land soft?",
      "values": {
        "salePrice": 270000,
        "sellingCosts": 16000,
        "purchasePrice": 180000,
        "depreciationTaken": 39000,
        "capGainsRate": 9,
        "recaptureRate": 15
      }
    },
    {
      "name": "Typical",
      "description": "Defaults — the most common real-world setup.",
      "values": {
        "salePrice": 450000,
        "sellingCosts": 27000,
        "purchasePrice": 300000,
        "depreciationTaken": 65000,
        "capGainsRate": 15,
        "recaptureRate": 25
      }
    },
    {
      "name": "Ambitious",
      "description": "Higher-end numbers — what if things really pop?",
      "values": {
        "salePrice": 720000,
        "sellingCosts": 43000,
        "purchasePrice": 480000,
        "depreciationTaken": 104000,
        "capGainsRate": 20,
        "recaptureRate": 25
      }
    }
  ],
  "limitations": [
    "Results are estimates before tax, fees, and inflation unless an input explicitly covers them.",
    "Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.",
    "This is educational maths, not financial advice. Check anything contractual with the lender or your accountant."
  ],
  "faq": [
    {
      "q": "Is recapture always 25%?",
      "a": "25% is the maximum rate — if your ordinary income tax bracket is lower than 25%, the recapture is taxed at your actual bracket instead, capped at 25%. Most investors in mid-to-high brackets end up paying close to the full 25% on the recapture portion."
    },
    {
      "q": "Can I avoid recapture entirely?",
      "a": "A 1031 exchange defers both capital gains and recapture as long as you meet the like-kind and reinvestment rules with no boot. Holding until death also erases the issue for heirs via the stepped-up basis rule, though that obviously doesn't help the original owner."
    },
    {
      "q": "Does this include state tax?",
      "a": "No. Most states tax the entire gain as ordinary income with no special capital gains or recapture rate, so add your state's marginal rate on top of these federal numbers for a full picture."
    },
    {
      "q": "What if I never claimed depreciation I was entitled to?",
      "a": "The IRS still requires recapture based on depreciation 'allowed or allowable,' meaning you owe the recapture tax on the amount you should have claimed even if you didn't. File Form 3115 to catch up missed depreciation before selling rather than losing the deduction and still owing the recapture tax."
    }
  ],
  "related": [
    "https://www.revenuelab.fyi/toolbox/1031-exchange-boot-basis",
    "https://www.revenuelab.fyi/toolbox/cost-segregation-first-year",
    "https://www.revenuelab.fyi/toolbox/equity-multiple-vs-irr"
  ],
  "license": "CC-BY-4.0",
  "citation": "RevenueLab — Depreciation Recapture on Sale Calculator (https://www.revenuelab.fyi/toolbox/depreciation-recapture-sale)"
}