Carl
Level 15

Investors & landlords

Understand also, that you will be taxed on recaptured depreciation no matter what. The recaptured depreciation is not included in the "2 of last 5" capital gains tax exclusion. Additionally, the recaptured depreciation is not taxed at the capital gains tax rate anyway. It's taxed as ordinary income anywhere from 0% up to a maximum of 25%, depending on your AGI.