I researched further (thanks to https://www.wallstreetmojo.com/depreciation-recapture/) and understood the following:
1. The recapture of depreciated amounts are, as you had explained, treated as ordinary income but limited to a max of 25% tax.
2. The capital gains and the recapture of depreciated amounts of the rental property can be deferred by properly executing a 1031 exchange.
Is my following understanding correct?:
For folks who has top tax brackets higher than 25% this is actually an advantage because they are allowed to deduct their rental income over years via depreciation deduction which saves higher taxes on their ordinary income. Moreover, rental incomes are subject to net investment income taxes which saves another 3.8%
