Definition
Tax recapture of depreciation taken during ownership when property is sold at gain.
Where you’ll meet it
Why am I selling, and what happens to the money?
See it in Selling a rental · Step 1About this term
Depreciation recapture tax is 25% on depreciation amount taken. Despite capital gains treatment, recapture is taxed at higher rate.
Pro Tip
Plan for depreciation recapture tax; 25% rate applies even if capital gains rate lower.
Example
Recapture tax of $25,000 (25% × $100,000 depreciation taken) on sale of investment property.