I am wondering however whether this amount of depreciation recapture will also contribute to the calculation of what federal income tax bracket I fall into for the purpose of determining long term capital gains rate for the rest of the gain on the sale. Yes it will.
Because the depreciation recapture is significant, I am concerned that my long term capital gains rate for the sale could be bumped up to a higher bracket if the depreciation recapture amount contributes to the determination of my federal income tax bracket. Yes it does.
The taxes will be calculated using the Qualifying Dividends & Cap Gain tax worksheet where the ordinary income (including the depreciation recapture) are "busted out" and the tax is calculated differently however your total AGI will determine which tax brackets you end up using ... if you like you can check out the worksheet yourself here: https://www.irs.gov/pub/irs-pdf/i1040sd.pdf
