topic Depreciation Recapture in Business & farm

Depreciation Recapture

moolelechip — Wed, 11 Feb 2026 10:44:00 GMT

We sold our only residential rental incurring a LT gain. Since this is not a business, are we subject to the recapture tax? Hers the details:

net proceeds 221955

cost basis 72548

lt gain 149407

accum dep. 107000

I am trying to pay an estimate today. Dont want to send an extra 25k if I dont have to!

Thanks.

Re: Depreciation Recapture

Anonymous_ — Sat, 14 Dec 2024 20:09:58 GMT

Re: Depreciation Recapture

moolelechip — Tue, 15 Oct 2024 13:54:24 GMT

Bummer. Thank you.

Re: Depreciation Recapture

AmeliesUncle — Tue, 15 Oct 2024 19:00:08 GMT

@moolelechip wrote:

net proceeds 221955
cost basis 72548
lt gain 149407
accum dep. 107000

If the Cost was only $72,548, how did you have $107,000 of depreciation?

Or did you mean the Cost was $177,548, and after the $107,000 of depreciation your Adjusted Basis was $72,548?

Re: Depreciation Recapture

moolelechip — Fri, 18 Oct 2024 11:27:28 GMT

No, the tax basis I provided is after accumulated depreciation.

Re: Depreciation Recapture

Opus 17 — Fri, 18 Oct 2024 23:21:24 GMT

@moolelechip wrote:

Bummer. Thank you.

Assuming constant tax rates, you got a 22% deduction each year for depreciation, which essentially says that the home is being "used up" by its business use. When you sell the home for more than the adjusted basis, that proves the home's value wasn't "used up" and you have to pay back the depreciation. However, that 22% (about $1500 in tax savings per year) was money in your pocket for the past 16 years that could have earned interest, been reinvested, or been spent in interesting ways that you could not have afforded otherwise. And because of inflation, the roughly $23,000 you have to pay back now is worth a lot less in real terms than the money you saved in tax in the past. So depreciation is still a pretty good arrangement, even if it has to be paid back.