Are you struggling to wrap your head around depreciation recapture? If so, you’re not alone.
When running your real estate business, you can account for the wear and tear of your property and any furnishings and appliances you own via depreciation. You can divide the costs associated with these items over several years through depreciation based on the schedules of asset classes that the internal revenue service (IRS) publishes.
Depreciation recapture refers to the portion of a gain you realize from selling a rental property taxed as ordinary income instead of capital gain. In other words, when you sell your property, the IRS taxes you on your depreciation deductions.
Still confused? That’s okay. In this post, we’ll show you how depreciation recapture works (and include examples), how to calculate it, and tell you if it can be avoided.
Here’s everything you need to know about depreciation recapture.
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