Skip to content
OfficialFinancial
Start free

Depreciation recapture calculator

Selling a rental that you've depreciated triggers two layers of federal tax (recapture + LTCG) plus state tax. This calculator estimates total tax owed and the deferral savings from a 1031 exchange or step-up at death.

Total taxable gain
$178,500
After $31,500 selling costs
Recapture portion (taxed at 25%)
$60,000
Capped at accumulated depreciation
LTCG portion
$118,500
Taxed at 15% bracket
If you sell now
$50,268
Federal recapture (25%): $15,000
Federal LTCG (15%): $17,775
NIIT (3.8% if high MAGI): $6,783
State (6%): $10,710
1031 exchange or hold to death
$0

1031: defers all of it into the next property; basis carries over.

Step-up at death: heirs reset basis to FMV; depreciation recapture wiped out entirely.

Tax saved (now): $50,268

Educational estimate. NIIT (3.8%) only applies above $200k single / $250k MFJ MAGI. State tax modeling varies — CA, NY tax all gains as ordinary income. Consult a CPA before transacting.

Want this tied to your real numbers?

Create a free account and we'll plug your profile in automatically — and place this tool inside your full roadmap.

Start My Free Financial Roadmap

FAQ

What is depreciation recapture?
When you sell rental real estate, the IRS recaptures the depreciation deductions you took at a flat 25% federal rate (§1250 unrecaptured gain). The rest of the gain is taxed at long-term capital gains rates (0%/15%/20% by bracket).
How does a 1031 exchange defer it?
Section 1031 like-kind exchange lets you swap one rental for another and defer the entire tax. Rules: identify replacement property within 45 days; close within 180 days; use a Qualified Intermediary; both properties must be investment / business (not primary residence). The deferred gain rolls into the new property's basis.
What about step-up at death?
If you die owning the property, your heirs get a basis step-up to FMV at death, wiping out depreciation recapture entirely. Combined with 1031s ("swap till you drop"), this is how dynasty real-estate families pass appreciation tax-free.
Can I sell and pay tax on installment?
Yes via §453 installment sale. The CAP GAIN portion can be spread across multiple years, keeping you in lower brackets. BUT the depreciation recapture is due in full in the year of sale — even on installment.

Related calculators

Educational guidance only. Not legal, tax, or individualized investment advice. We do not recommend individual securities or guarantee outcomes.