What Is Depreciation Recapture When Selling Property?
By JC Pacific Corp Published 2026-09-01 Last professionally reviewed: September 2026
Depreciation recapture is a general term used for tax consequences associated with prior depreciation when depreciated property is sold. Real property may involve unrecaptured Section 1250 gain and other rules rather than one simple calculation.
Why does depreciation affect the sale?
Depreciation generally reduces adjusted basis. A lower adjusted basis can increase gain when the property is sold.
What does allowed or allowable mean?
Tax rules may account for depreciation the taxpayer was entitled to claim, even if the deduction was not actually taken. Sellers should not assume that missing depreciation schedules eliminate the issue.
Does the principal-residence exclusion cover depreciation?
Gain attributable to certain depreciation after May 6, 1997, generally cannot be excluded under the principal-residence exclusion. Current rules and the property's history must be reviewed.
Frequently Asked Questions
Is depreciation recapture taxed at the normal capital-gains rate?
Different portions of gain can receive different federal treatment. California treatment should also be calculated separately.
What if I rented only one room?
Mixed personal and rental use may require allocation.
What if records are missing?
A tax professional may need to reconstruct the depreciation history.
Educational information
This article simplifies a technically complex tax subject.
Obtain every depreciation schedule before listing a former rental or mixed-use property.
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A note on legal advice: These guides provide general, educational information about California real estate practice. They are not legal advice and do not create an attorney-client relationship. Mortgage information is general education, not individualized lending, tax or legal guidance. For advice about your specific offer, contract, closing or financing, consult a qualified California real estate attorney and a qualified mortgage professional.
A note on these tax guides: The California home-sale tax articles provide general educational information and have been reviewed by a qualified California tax professional. They are not tax, legal, accounting, financial, or insurance advice, and JC Pacific Corp and its real estate professionals are not tax advisers. Sale price, equity, net proceeds, taxable gain, withholding, and final tax are different numbers, and withholding is a collection mechanism, not a determination of final tax liability. Verify current IRS and California Franchise Tax Board forms and rules with a qualified tax professional before making decisions.