Is there depreciation recapture on personal property?
Emma Jordan
Published May 18, 2026
Section 1245 is a way for the IRS to recapture allowable or allowed depreciation or amortization the taxpayer has taken on 1231 property. This recapture occurs at the time a business sells certain tangible or intangible personal property at a gain.
How much can you depreciate on a rental property?
By convention, most U.S. residential rental property is depreciated at a rate of 3.636% each year for 27.5 years. Only the value of buildings can be depreciated; you cannot depreciate land.
Typically the major benefit of structuring a personal property sale as a 1031 Exchange is the deferral of the recapture tax on depreciation that was previously deducted by the taxpayer. Be aware, ordinary income tax on the gain subject to personal property depreciation recapture can be substantial (upwards of 35%).
How to avoid depreciation recapture tax on rental property?
Fortunately, the 1031 exchange section showed that the investor was able to defer the payment of depreciation recapture or even capital gains.
When does the recapture of depreciation take place?
Depreciation is recaptured at the time of sale, whether you took the depreciation or not. Other Taxes. Be sure to investigate the other taxes you may have to pay when you sell the property. This may include state and/or local income taxes to the state where the property is located and/or capital gains taxes.
Do you have to pay recapture taxes when you sell a house?
You can NOT avoid depreciation recapture taxes by making the property your principal residence. You will still owe the taxes when you sell the property. Depreciation is recaptured at the time of sale, whether you took the depreciation or not.
How does a sale of a rental property defer tax?
A rental property can also be sold as part of a like-kind exchange to defer both capital gains and depreciation recapture taxes. This involves disposing of an asset and immediate acquiring another similar asset, effectively deferring taxes until a later point in time when a sale is not followed by an acquisition.
