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Depreciation Recapture Income Tax Rates and Guidelines

Typically, for properties held more than 12 months, an Investor will encounter a Federal capital gain income tax rate of 15%, which is the maximum that can be levied in any given instance; in addition, there likely will be local or state-based taxes to contend with as well.

When 1250 property has been in service for more than one year I sold, the three income tax rates that may apply consist of the following:

  1. Excess Depreciation Recapture: the portion of depreciation that exceeds straight-line depreciation, which causes excess depreciation recapture on the disposition of 1250 property on aging additions to a property that includes sidewalks, driveways, fencing, parking, and landscaping.
  2. Depreciation Recapture: accumulated 1250 depreciation is taxed at a flat rate of 25% upon sale, up to a maximum of the amount of the recognized gain.
  3. Capital Gains: federal income tax rate on capital gains for Code Section 1250 property held longer than one year is fifteen percent.

Note that taxation runs consecutively from income tax rate one through income tax rate three and apply to property acquired in a 1031 exchange transaction.


Disclaimer: 1031 exchange made simple does not guarantee the performance of the QI's in our referral network and we can not be held liable for any misrepresentations or mistakes in regards to a 1031 exchange by one of the QI's that we refer to you. 1031 Exchange made simple does not provide tax advice nor can we make representations regarding the tax consequences of an exchange transaction. 1031 Exchange made simple is a 1031 QI Referral Network. 1031 made simple is not responsible (in any way) for the performance, creditability, and financial condition of any QI in our network. In this new economic environment it is imperative that all potential 1031 exchange customers do their own due diligence and research on any QI that they may use, on a 1031 exchange. Please verify and check the validity of the Bonding and Insurance of your QI. It may be wise to have your 1031 exchange accounts set up as separate, individual customer accounts. Our web site is to be used as a information based web site only. All parties doing a 1031 exchange must consult their tax advisors or attorney for this information.

If you are in need of a qualified intermediary and would like to be matched up with one of our fully licensed and bonded QI's in your state, please call 1-877-812-1031

If you are a fully licensed Qualified Intermediary and would like to be evaluated and possibly added to our network of QI state and local providers, please call us today at: 1-877-812-1031


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