--- title: What Triggers Depreciation Recapture? description: There’s an end to the benefits associated with depreciation, though. At some point, the IRS will require an accounting and taxation of any depreciation deductions claimed while you held the asset. image: https://www.realized1031.com/hubfs/tax-2.jpg --- [![Realized 1031 Exchange Marketplace](https://www.realized1031.com/hs-fs/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black.png?width=240&height=80&name=Realized-Logo-Black.png "Realized 1031 Logo") ](https://www.realized1031.com/) - [Wealth Management Gap](https://www.realized1031.com/the-wealth-management-gap) - [Our Process](https://www.realized1031.com/how-realized-works) - [Financial Advisors](https://www.realized1031.com/advisor) - [Resources](https://www.realized1031.com/resources) - [The Company](https://www.realized1031.com/about-us) - [Articles](https://www.realized1031.com/blog) [Register](https://www.realized1031.com/marketplace) [Log In](https://www.realized1031.com/login) - Better Business Bureau Rating: **A+** - [FINRA BrokerCheck](https://brokercheck.finra.org/firm/summary/22333) - [Call](tel:1-877-797-1031) **(877) 797-1031** # What Triggers Depreciation Recapture? Posted Jun 5, 2023 ![tax-2](https://www.realized1031.com/hs-fs/hubfs/tax-2.jpg?width=751&height=500&name=tax-2.jpg) Investment property owners are likely quite familiar with depreciation, since it allows them to deduct certain costs associated with acquiring and improving income-producing real estate, which can lead to lower annual taxable income.  Real property investors can take advantage of a host of tax write offs, including property taxes, mortgage, and some other forms of insurance, maintenance and repair costs, marketing and travel expenses, and professional services related to the management and upkeep of rental properties. Depreciation adds another important tool to your tax planning strategies. Residential rental properties can be depreciated over a 27.5-year timeframe, while commercial properties can be depreciated over 39 years of useful life.  There’s an end to the benefits associated with depreciation, though. At some point, the IRS will require an accounting and taxation of any depreciation deductions claimed while you held the asset.   Let’s take a look at what triggers depreciation recapture.  ### Depreciation Recapture – When it Comes Due  If you divest an income-producing rental property for a loss, you won’t have to worry about paying taxes on any depreciation recapture you claimed while you held the asset. You’ll get a pass due to your capital losses.  However, anytime you sell a rental property and realize a gain above your cost-adjusted basis, you’ll have to pay taxes on the amount you claimed through depreciation. This tax is called depreciation recapture. In the eyes of the IRS, you benefited financially from asset appreciation when you netted a capital gain, so you’ll have to pay back a portion of the depreciation you claimed – you don’t get to double-dip by claiming a tax break and then profiting from asset appreciation.  If you held the property for a year or longer before selling it for a profit, you’ll pay taxes on any realized gains at long-term capital gains rates of 0, 15, or 20 percent depending on your filing status and income. Depreciation recapture is taxed at a higher rate, though, and here’s why.  The annual depreciation dedication offsets ordinary income. If you purchase a rental home and immediately place it into service, you can begin deducting 3.636 percent of the asset’s cost basis (3.636 percent is 100 percent broken down over the useful lifespan of 27.5 years) from your taxable income. The total amount you claimed through depreciation, therefore, is taxed at your nominal tax rate rather than the more favorable capital gains rate. However, the maximum tax rate for depreciation recapture is currently capped at 25 percent for 2022.  ### Putting it all Together  Depreciation is an important tax break for investment property owners because it allows them to spread out acquisition, maintenance, and repair costs over time. The depreciation tax deduction also offsets ordinary income, which can lead to reduced tax liabilities.  Depreciation recapture is triggered when you sell a rental property for a gain. If you lose money in the deal, you won’t have to pay back any of your depreciation deductions. If you netted a gain, though, you’ll have to pay taxes on the accumulated depreciation at your nominal tax rate, with a cap of 25 percent.  A licensed tax professional can help you determine your adjusted cost basis in a rental property, and your potential tax liability through depreciation recapture. Investors who face significant capital gains and depreciation recapture taxes after selling investment properties may want to consider completing a [1031 exchange ](https://www.realized1031.com/1031-exchange)in order to defer their tax liabilities.  This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation. Costs associated with a 1031 transaction may impact investor's returns and may outweigh the tax benefits. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities. Learn Ways to Help Reduce or Defer Taxes [![Learn Tax-Deferred Strategies](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/IPWM-Tax-ebook-250b.png?width=250&height=295&name=IPWM-Tax-ebook-250b.png "Discover ways to potentially ...") ](https://www.realized1031.com/blog/what-triggers-depreciation-recapture#blogform) Download eBook ---   --- ### Learn Tax-Deferred Strategies ![Learn Ways to Help Reduce or Defer Taxes](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/IPWM-Tax-ebook-550a.jpg?width=550&height=600&name=IPWM-Tax-ebook-550a.jpg) Discover ways to potentially grow wealth by managing taxes. By providing your email and phone number, you are opting to receive communications from Realized. If you receive a text message and choose to stop receiving further messages, reply STOP to immediately unsubscribe. Msg & Data rates may apply. To manage receiving emails from Realized visit the Manage Preferences link in any email received. Search ### [Why Realized](https://www.realized1031.com/why-realized) - [Wealth Management](https://www.realized1031.com/the-wealth-management-gap) - [Why Realized](https://www.realized1031.com/why-realized) - [Our Process](https://www.realized1031.com/how-realized-works) - [Scenarios](https://www.realized1031.com/scenarios) - [Private Client Program](https://www.realized1031.com/private-client) - [Realized Exchange Services](https://www.realized1031.com/realized-exchange-services) ### [The Company](https://www.realized1031.com/about-us) - [The Team](https://www.realized1031.com/about-us) - [FAQ](https://www.realized1031.com/frequently-asked-questions) - [Testimonials](https://www.realized1031.com/testimonials) - [Press](https://www.realized1031.com/press) - [Careers](https://www.realized1031.com/careers) ### [Partners](https://www.realized1031.com/partners) - [Financial Advisors](https://www.realized1031.com/advisor) - [Broker Dealers](https://www.realized1031.com/partners/broker-dealers) - [Real Estate Agents](https://www.realized1031.com/partners/real-estate-agents) - [Certified Public Accountants](https://www.realized1031.com/partners/certified-public-accountants) ### [Resources](https://www.realized1031.com/resources) - #### Learn - [Articles](https://www.realized1031.com/blog) - [Glossary of Terms](https://www.realized1031.com/glossary) - [Capital Gains Tax Rates](https://www.realized1031.com/capital-gains-tax-rate) - #### Watch - [Video Library](https://www.realized1031.com/videos) - [Webinar Archive](https://www.realized1031.com/webinars) - #### Read - [Delaware Statutory Trust](https://www.realized1031.com/delaware-statutory-trust) - [Tenants-In-Common](https://www.realized1031.com/tenants-in-common-tic) - [1031 Exchange](https://www.realized1031.com/1031-exchange) - [Qualified Intermediary](https://www.realized1031.com/qualified-intermediary) - [Qualified Opportunity Zones](https://www.realized1031.com/opportunity-zones) #### Realized - 500 W 13th Street Austin, TX 78701 - (877) 797-1031 ##### [Contact Us](https://www.realized1031.com/contact-us) - [![Realized on Facebook](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-facebook-whiterev.png?width=60&height=60&name=social-facebook-whiterev.png)](https://www.facebook.com/Realized/) - [![Realized on LinkedIn](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-linkedin-whiterev.png?width=60&height=60&name=social-linkedin-whiterev.png)](https://www.linkedin.com/company/realized/) - [![Realized on YouTube](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-youtube-whiterev.png?width=60&height=60&name=social-youtube-whiterev.png)](https://www.youtube.com/c/Realized1031?sub_confirmation=1) - [![Realized Holdings, Inc. BBB Business Review](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/bbb/RZH2-bbb-seal.png?width=40&height=65&name=RZH2-bbb-seal.png)](http://www.bbb.org/central-texas/business-reviews/real-estate-investors/realized-holdings-llc-in-austin-tx-1000112948/#bbbonlineclick) - [![FEA Logo](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/fea/RZH2-fea-logo.png?width=82&height=65&name=RZH2-fea-logo.png "FEA Logo")](https://www.1031.org) SECURITIES DISCLOSURE Realized1031.com is a website operated by Realized Technologies, LLC, a wholly owned subsidiary of Realized Holdings, Inc. (“Realized Holdings”). Securities and/or Investment Advisory Services may be offered through Registered Representatives or Investment Advisor Representatives of Realized Financial, Inc. ("Realized"), a broker/dealer, member [FINRA](https://www.finra.org)/[SIPC](https://www.sipc.org/), and registered investment adviser. Realized is a subsidiary of Realized Holdings, Inc. ("Realized Holdings"). Check the background of this firm on [FINRA's BrokerCheck](https://brokercheck.finra.org/firm/summary/22333). Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment. Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Alternative investments are often sold by prospectus that discloses all risks, fees, and expenses. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing. Alternative investments have higher fees than traditional investments and they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain and should not be deemed a complete investment program. The value of the investment may fall as well as rise and investors may get back less than they invested. This site is published for residents of the United States who are accredited investors only. Registered Representatives and Investment Advisor Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all of services referenced on this site are available in every state and through every representative listed. For additional information, please contact the Realized Compliance department at 512-472-7171 or info@realized1031.com. - [Terms & Conditions](https://www.realized1031.com/terms-and-conditions) - [Privacy Policy](https://www.realized1031.com/privacy-policy) - [Form CRS](https://www.realized1031.com/hubfs/common-files/disclosures/FormCRS.pdf) - [ADV 2A](https://www.realized1031.com/hubfs/common-files/disclosures/ADV2A.pdf) - [Reg BI Disclosures](https://www.realized1031.com/hubfs/common-files/disclosures/RegBI.pdf) -   © 2026 Realized Holdings, Inc. ```json { "@context" : "http://schema.org/", "@type" : "BlogPosting", "articleBody" : "Investment property owners are likely quite familiar with depreciation, since it allows them to deduct certain costs associated with acquiring and improving income-producing real estate, which can lead to lower annual taxable income. Real property investors can take advantage of a host of tax write offs, including property taxes, mortgage, and some other forms of insurance, maintenance and repair costs, marketing and travel expenses, and professional services related to the management and upkeep of rental properties. Depreciation adds another important tool to your tax planning strategies. Residential rental properties can be depreciated over a 27.5-year timeframe, while commercial properties can be depreciated over 39 years of useful life. There’s an end to the benefits associated with depreciation, though. At some point, the IRS will require an accounting and taxation of any depreciation deductions claimed while you held the asset. Let’s take a look at what triggers depreciation recapture. Depreciation Recapture – When it Comes Due If you divest an income-producing rental property for a loss, you won’t have to worry about paying taxes on any depreciation recapture you claimed while you held the asset. You’ll get a pass due to your capital losses. However, anytime you sell a rental property and realize a gain above your cost-adjusted basis, you’ll have to pay taxes on the amount you claimed through depreciation. This tax is called depreciation recapture. In the eyes of the IRS, you benefited financially from asset appreciation when you netted a capital gain, so you’ll have to pay back a portion of the depreciation you claimed – you don’t get to double-dip by claiming a tax break and then profiting from asset appreciation. If you held the property for a year or longer before selling it for a profit, you’ll pay taxes on any realized gains at long-term capital gains rates of 0, 15, or 20 percent depending on your filing status and income. Depreciation recapture is taxed at a higher rate, though, and here’s why. The annual depreciation dedication offsets ordinary income. If you purchase a rental home and immediately place it into service, you can begin deducting 3.636 percent of the asset’s cost basis (3.636 percent is 100 percent broken down over the useful lifespan of 27.5 years) from your taxable income. The total amount you claimed through depreciation, therefore, is taxed at your nominal tax rate rather than the more favorable capital gains rate. However, the maximum tax rate for depreciation recapture is currently capped at 25 percent for 2022. Putting it all Together Depreciation is an important tax break for investment property owners because it allows them to spread out acquisition, maintenance, and repair costs over time. The depreciation tax deduction also offsets ordinary income, which can lead to reduced tax liabilities. Depreciation recapture is triggered when you sell a rental property for a gain. If you lose money in the deal, you won’t have to pay back any of your depreciation deductions. If you netted a gain, though, you’ll have to pay taxes on the accumulated depreciation at your nominal tax rate, with a cap of 25 percent. A licensed tax professional can help you determine your adjusted cost basis in a rental property, and your potential tax liability through depreciation recapture. Investors who face significant capital gains and depreciation recapture taxes after selling investment properties may want to consider completing a 1031 exchange in order to defer their tax liabilities.", "articleSection" : [ "Tax" ], "author" : { "@type" : "Person", "email" : "marketing@realized1031.com", "image" : "", "name" : "The Realized Team", "url" : "https://www.realized1031.com/blog/author/the-realized-team" }, "dateModified" : "2023-06-06T00:00:00+0000", "datePublished" : "2023-06-06T00:00:00+0000", "description" : "There’s an end to the benefits associated with depreciation, though. At some point, the IRS will require an accounting and taxation of any depreciation deductions claimed while you held the asset.", "headline" : "What Triggers Depreciation Recapture?", "image" : { "@type" : "ImageObject", "height" : 500, "url" : "https://733513.fs1.hubspotusercontent-na1.net/hubfs/733513/tax-2.jpg", "width" : 751 }, "mainEntityOfPage" : "https://www.realized1031.com/blog/what-triggers-depreciation-recapture", "name" : "What Triggers Depreciation Recapture?", "publisher" : { "@type" : "Organization", "address" : { "@type" : "PostalAddress", "addressCountry" : "USA", "addressLocality" : "Austin", "addressRegion" : "TX", "postalCode" : "78701", "streetAddress" : "500 W 13th Street " }, "logo" : { "@type" : "ImageObject", "height" : 60, "url" : "http://www.realized1031.com/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black-No-Margin-296x60-AMP.png", "width" : 296 }, "name" : "Realized" }, "thumbnailUrl" : "https://733513.fs1.hubspotusercontent-na1.net/hubfs/733513/tax-2.jpg" } ```