Depreciation Recapture on sale of rental property
I recently sold a rental property for a very small capital gain (after costs less depreciation over the years). It looks like I will be paying a regular income tax rate for all of this small gain. Will I have to pay an additional amount to recapture all depreciation taken? What if I had sold this property at a loss? Would I have to pay taxes on all depreciation taken in prior years?
Thanks for your question! You’ll first have to calculate the property’s depreciated value to determine if/how much recapture you’ll have to pay. You can postpone the depreciation recapture by re-investing any gain via a 1031 exchange.
Here are two articles we have that might help you. The first is about depreciation recapture and it shows you how to calculate the depreciated value. The other is on section 1031 e. Hope these help!
Rental Property Depreciation: https://fitsmallbusiness.com/rental-property-depreciation-rules/
Section 1031 Exchange: https://fitsmallbusiness.com/1031-exchange-like-kind/