Tax & compliance
Unrecaptured Section 1250 Gain
Formula reviewed by Tahir Asif, CMA
The part of the gain on selling depreciable real property that is due to straight-line depreciation, taxed at your ordinary rate up to a maximum of 25%.
Unrecaptured section 1250 gain is the lesser of the gain on the building or the straight-line depreciation taken on it. It is taxed at your ordinary income tax rate, but never at more than 25%. If part of it falls in a lower bracket, that part is taxed at the lower rate.
It is stacked on top of your other income and below the rest of the long-term capital gain, so it uses up the lower brackets first. The remaining gain is taxed at 0%, 15% or 20%.
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