About the Depreciation Recapture Calculator
When you sell a rental property or business asset you have depreciated, part of your profit is taxed differently from an ordinary capital gain. This calculator works out your adjusted basis and total gain, splits it into depreciation recapture and the remaining capital gain, and estimates the federal tax on the sale using the 2026 brackets — plus the 3.8% net investment income tax and an optional state rate.
For real estate (Section 1250 property depreciated straight-line), the gain up to the depreciation you claimed — or were allowed to claim — is “unrecaptured Section 1250 gain”, taxed at your ordinary rate but never more than 25%. For equipment, vehicles and other Section 1245 property, the gain up to the depreciation taken is recaptured as ordinary income at your full bracket rate. Any gain above the depreciation is a long-term capital gain taxed at 0%, 15% or 20%.
The tax is computed with the IRS Schedule D Tax Worksheet, stacking the sale on top of your other income and the 2026 standard deduction, so it shows the real extra tax caused by the sale. It assumes you held the asset more than a year and that the sale is not part of a 1031 exchange or installment sale; it ignores state recapture rules and suspended passive losses that the sale would release.
With the default inputs, the total tax on the sale is $33,764.00. Change any value above to recalculate instantly.
How to use the depreciation recapture calculator
- 1Choose real estate (Section 1250) or equipment and vehicles (Section 1245).
- 2Enter what you paid, capital improvements and the total depreciation claimed.
- 3Enter the sale price and selling costs.
- 4Enter your filing status and other income for the year of sale.
- 5Choose whether NIIT applies and add a state rate to see the full tax bill.
Formula and method
The gain is the amount realized minus the adjusted basis, which is reduced by every dollar of depreciation you claimed or were entitled to claim. The part of the gain that is not more than that depreciation is the recapture amount. For Section 1245 property it is ordinary income; for real estate depreciated straight-line it is unrecaptured Section 1250 gain, part of your net capital gain but taxed at a maximum 25%.
Federal tax uses the 2026 Schedule D Tax Worksheet: your other income (after the $16,100/$32,200 standard deduction) is taxed first at regular rates, unrecaptured 1250 gain fills the brackets up to the 24% bracket at ordinary rates and is taxed at 25% beyond that, and the remaining gain is taxed at 0%, 15% or 20% using the 2026 thresholds ($98,900 and $613,700 for joint filers). The 3.8% NIIT applies to the lesser of the gain or modified AGI above $200,000 ($250,000 joint). The result is the increase in tax caused by the sale.
- Depreciation
- Total depreciation allowed or allowable since you placed the asset in service
- Recapture
- Unrecaptured Sec. 1250 gain (real estate) or Sec. 1245 ordinary income (equipment)
- Tax(x)
- 2026 federal income tax computed with the Schedule D Tax Worksheet
Worked examples
Rental house sold after years of depreciation (married filing jointly)
Basis of $320,000 less $80,000 depreciation is $240,000, so selling for a net $423,000 gives a $183,000 gain. The first $80,000 is unrecaptured 1250 gain taxed at the couple’s 12% and 22% rates ($16,300) and the remaining $103,000 at 15% ($15,450), for $31,750 of federal tax — $5,965 more than if it were all capital gain. AGI reaches $303,000, so the NIIT adds $2,014 (3.8% of the $53,000 above $250,000).
Business equipment sold by a single filer (Section 1245)
The machine’s basis is $20,000 after $30,000 of depreciation, so the $35,000 sale gives a $15,000 gain. Because the gain is less than the depreciation, all of it is Section 1245 recapture taxed as ordinary income — $3,300 in the 22% bracket, $1,050 more than the 15% capital gains rate would cost.
Small rental sold by a lower-income single owner
A $78,000 gain splits into $40,000 of unrecaptured 1250 gain and $38,000 of capital gain. With $40,000 of other income, the recapture is taxed at 12% and 22% ($6,150) and the capital gain at 15% ($5,700), for $11,850 of federal tax. AGI stays under $200,000 so there is no NIIT, and a 5% state rate adds $3,900.
Frequently asked questions
What is the depreciation recapture tax rate?+
For real estate, unrecaptured Section 1250 gain is taxed at your ordinary income rate, capped at 25%. For equipment, vehicles and other Section 1245 property, recapture is taxed as ordinary income at your full marginal rate, up to 37%. Gain above the depreciation is a capital gain taxed at 0%, 15% or 20%.
Do I owe recapture if I never claimed depreciation?+
Yes. Recapture is based on depreciation “allowed or allowable”, so the IRS reduces your basis by the depreciation you were entitled to take even if you did not claim it. If you missed depreciation in earlier years, you can usually catch it up with Form 3115 before you sell.
Does the home sale exclusion cover depreciation recapture?+
No. If you rented out or used part of your home for business after 6 May 1997, the gain equal to that depreciation is taxable even when the rest of the gain qualifies for the $250,000/$500,000 Section 121 exclusion.
How can I avoid depreciation recapture?+
You can defer it with a 1031 like-kind exchange into other investment real estate, spread it with an installment sale (recapture on 1245 property is still taxed in the year of sale), or eliminate it by holding the property until death, when heirs get a stepped-up basis.
Does NIIT apply to depreciation recapture?+
For passive rental property, yes — the entire gain including recapture is net investment income, subject to 3.8% to the extent modified AGI exceeds $200,000 ($250,000 joint). Real estate professionals and owners of an active trade or business are generally exempt.
Where is depreciation recapture reported?+
Sales of business and rental property go on Form 4797. Section 1245 recapture flows to Form 4797 Part II as ordinary income, while the Section 1231 gain and unrecaptured Section 1250 gain flow to Schedule D, where the 25% portion is computed on the Schedule D Tax Worksheet.
Tax results are estimates based on published rules and simplified assumptions. They are not tax advice — check official guidance or a tax professional for your situation.