RECAPTURE CALCULATOR
Selling, converting, 1031-ing, or buying out a partner? Know what you owe back.
When you sell a rental property — or take certain other dispositions — a portion of the depreciation you’ve claimed gets recaptured by the IRS. Most owners don’t learn the number until tax season, after the deal has already closed. We’ll give it to you up-front so the deal math actually pencils.
METHODOLOGY PEDIGREE
Built on cost segregation methodology IRS-blessed since 1997 — the same engineering used by Big 4 firms and REIT controllers for two decades. Used by property owners, including the founder. Trusted by CPAs, tax and real estate professionals.
THE BASICS
The truth most cost-seg firms don’t tell you.
Cost segregation accelerates your deductions. You take more depreciation now, against today’s income, and the time value of money makes that genuinely valuable. But when you sell the property, a portion of those accelerated deductions get recaptured. The IRS comes back for them.
Two flavors of recapture matter:
- §1250 (real property). Unrecaptured §1250 gain is taxed at a max federal rate of 25% on the depreciation you’ve taken on the building. This applies to standard MACRS depreciation whether or not you’ve done a cost-seg study.
- §1245 (personal property). The pieces you accelerated through cost seg — appliances, carpet, fencing, landscaping — are §1245 property. Recapture on these is taxed at ordinary income rates, up to the cumulative depreciation taken.
Both flavors interact with state-level conformity rules, installment sales, 1031 exchanges, and the partner-disposition rules under §708. We model all of that.
COMMON SCENARIOS
When you need this number.
Selling outright.
You’re modeling a sale and want to know what your after-tax proceeds actually look like.
Converting to primary residence.
Moving back in or converting to a residence triggers specific rules. Mistime it and you keep the depreciation but lose §121.
1031 exchange planning.
Recapture interacts with deferred-gain treatment in non-obvious ways. We’ll show you what carries and what triggers.
Partner buyout (§708).
Buying out a co-investor in a partnership-held rental is a partial disposition. Recapture lands at the partner level, not the partnership.
THE DELIVERABLE
Plain-English recapture schedule.
Whether you bought a study from us or from another firm, the recapture math is mechanical — we just need your depreciation history and the disposition facts. Output is a one-to-three-page schedule you can hand to your CPA.
Federal §1250 + §1245 split.
Cumulative depreciation by class (5/7/15/27.5/39), §1245 portion at ordinary rates, §1250 portion at unrecaptured-gain rates. Total federal recapture exposure.
State-level treatment.
States vary widely. Some conform to federal recapture, some have their own rules, a handful don’t recapture at the state level at all. Your state’s actual treatment is in the schedule.
Net after-tax proceeds.
The number that actually matters: gross sale price minus mortgage payoff minus selling costs minus federal recapture minus state recapture. The deal-pencil number.
TWO PATHS
How to get your number.
PATH 1
You bought a CostSegLogic study.
Recapture schedule is already in your study. Pull it out of your account, plug in the disposition facts (sale price, date, selling costs), and the math runs against your cumulative depreciation. No extra purchase required.
PATH 2
You bought a study elsewhere — or never did.
Standalone recapture schedule, $99. Or it’s included free in the $1,199 CPA-Verified study. Drop your details below and we’ll route the right next step. We need your depreciation history (typically Form 4562 from your last filed return and the cost-seg study if you have one) and the disposition facts.
REQUEST A RECAPTURE SCHEDULE
Tell us about the property and the disposition.
Drop your name, email, and a quick note about what you’re modeling (sale, conversion, partner buyout, 1031 exchange) and we’ll get back within two business days with the next step and a quote.
RECAPTURE FAQ
Common questions.
Is recapture only for properties that did cost seg?
No. Standard MACRS depreciation triggers §1250 recapture on sale whether or not you ran a cost-seg study. What cost seg adds is the §1245 piece (personal-property portion), which is taxed at ordinary income rates rather than the 25% unrecaptured-gain rate. Most owners want both numbers.
Does a 1031 exchange wipe out recapture?
A 1031 exchange defers gain — including depreciation recapture — into the replacement property. It doesn’t wipe it out. The accumulated recapture rides along with you and shows up when you eventually sell without exchanging again. Our schedule shows you the deferred recapture exposure on a 1031.
What about converting the property to my primary residence?
Conversion to primary residence doesn’t trigger recapture by itself, but it sets up the §121 home-sale exclusion in a specific way. Depreciation taken after May 6, 1997 is not eligible for §121 exclusion — it gets recaptured at sale. We model the timing explicitly so you can plan around it.
How is partner buyout recapture different?
Buying out a partner in a partnership-held property is a partial disposition under §708 and §731/§741. The exiting partner recognizes recapture on their share; the remaining partners step up their basis. The accounting is more involved than a simple sale, and the schedule walks through it with the actual partner shares and acquisition history.
ALSO KNOW THE OTHER NUMBER
Selling now? Bought new property too?
If you’re replacing the property you’re selling with another rental, run the snapshot on the new one. Cost-seg upside there often offsets a meaningful portion of the recapture exposure on the property you’re leaving.