Rental Property Depreciation & Recapture Calculator

Rental property is depreciated on paper every year, and the deduction lowers the rental income you are taxed on; when you sell, the IRS takes part of that benefit back through depreciation recapture. This calculator does both halves: the yearly depreciation from the month you placed the property in service, and the federal tax on a sale, split into the recaptured part and the ordinary capital gain.

Residential rental buildings are depreciated straight-line over 27.5 years and commercial buildings over 39 years (MACRS, IRS Publication 946). Only the building is depreciated: land never is, so the calculator takes it out first. The mid-month convention counts the month the property was placed in service as half a month, so a rental put in service in June gets 6.5 months of depreciation in its first year, and the month of sale also counts as half. On a sale, the gain equal to the depreciation you were allowed to take is unrecaptured section 1250 gain, taxed at your ordinary rate but never more than 25%; the rest of the gain is a long-term capital gain taxed at 0%, 15% or 20%, and the 3.8% net investment income tax applies to the whole gain above $200,000 of income ($250,000 joint) unless you are a real estate professional.

Two things surprise sellers. Recapture is owed on the depreciation you were entitled to even if you never claimed it, so skipping the deduction saves nothing at sale; file Form 3115 to catch up instead. And recapture does not cancel the benefit: in the 24% bracket or lower, it is taxed at the same rate the deduction saved you, so depreciation mostly defers tax rather than increasing it, and a 1031 exchange into another rental defers both the recapture and the capital gain.