Sale of rental property and depreciation

[NotEasy]

I think I have read in this forum that sale of rental property is considered 1250 property.

My question is : Is the depreciation recaptured taxed at ordinary income rate or capital gain rate? My program adds it to the capital gain and tax it at the favorable long term capital gain rate. Is it correct?

[BOB W]

I think I have read in this forum that sale of rental property is considered 1250 property.

My question is : Is the depreciation recaptured taxed at ordinary income rate or capital gain rate? My program adds it to the capital gain and tax it at the favorable long term capital gain rate. Is it correct?

Recapture is capped to a 25% rate.

[NotEasy]

Recapture is capped to a 25% rate.

Sorry...does "capped to" mean the full amount of the depreciation recaptured is taxed at 25% rate?

[BOB W]

Sorry...does "capped to" mean the full amount of the depreciation recaptured is taxed at 25% rate?

It is taxed at ordinary tax rates but no higher than 25% for the recapture of depreciation. CG only applies to any gain above depreciation recapture.

[solomon]

Your software probably is doing it correctly. Real estate depreciated at straight line rate does not have deprecation recapture taxed at ordinary rates. It would have unrecaptured 1250 gain taxed at a capital gain rate up to a maximum of 25%. Your Schedule D worksheet should do the calculation.

[Burke]

Sorry...does "capped to" mean the full amount of the depreciation recaptured is taxed at 25% rate?

Not necessarily. It means that is the TOP rate. Your TP may be in a lower bracket or straddle brackets due to gain if it is not large, and he would pay the rate which falls in each bracket.