When you are depreciating assets and you sell the property do you get all the undepreciated value left as a write off or just the current years portion up to the sale and the rest is lost?
Neither. Many have the incorrect belief that depreciation is a permanent deduction. It is not. When you sell the property/asset, you are required to recapture all depreciation taken in the year of the sale, and pay taxes on it. If one thinks they can get around that by not depreciating the property/asset, that's not so. The law reads that you are required to recapture the depreciation taken, or the depreciation you *should* have taken, in the year the sell the property/asset. Two things about depreciation recapture.
1) Recaptured depreciation is added to your AGI in the tax year you sell. This has the potential to bump you into the next higher tax bracket. It just depends on the numbers.
2) Recaptured depreciation is taxed at the ordinary tax rate anywhere from 0% to a maximum of 25%. Again, it just depends on the numbers.
