Depreciation recapture is part of the bill too.
Capital gains get the attention, but the depreciation you claimed over the years is taxed separately when you sell — unless you exchange.
Depreciation recapture
Unrecaptured gain is taxed at up to 25%
For real property, previously claimed depreciation is taxed at a higher rate than long-term capital gains when the sale is recognized.
A 1031 defers it along with the gain
Exchange, and both the capital gain and the recapture ride along into the replacement property.
Basis carries over
Your basis follows you into the new property, which is why running the numbers with your CPA matters before you decide.
Three steps, and we carry most of them
Call before you close
We confirm an exchange fits, map the deadlines against your timeline, and put the exchange agreement in place before the sale closes.
We hold the proceeds
Funds go from the closing table to us, never to you. That is what keeps the deferral intact.
You buy, we close it out
You identify and negotiate the replacement property. We handle the documentation, the funding and the reporting trail.
1031 Specialists
Investors who have held a rental for fifteen years are often surprised that recapture is the larger of the two numbers. It is one of the clearest arguments for exchanging rather than selling outright.
We are a qualified intermediary for IRC Section 1031 tax-deferred exchanges, facilitating exchanges for real estate investors in all fifty states. We handle the exchange agreement, the identification and closing deadlines, and the custody of exchange funds. Every exchange includes unlimited tax optimization consulting, audit protection and an attorney guarantee, on a simple flat fee you pay at close.
Depreciation recapture, answered
What is depreciation recapture?
The depreciation you deducted over the years is taxed when you sell. For real property, the unrecaptured portion is taxed at a higher rate than long-term capital gains.
Does a 1031 defer recapture too?
Yes. Both the capital gain and the depreciation recapture are deferred into the replacement property.
Why is my tax bill bigger than I expected?
Usually recapture. Investors who have held a property for a long time often find the recapture exceeds the capital gains portion.
Talk to someone before the clock starts
Reach me directly, or call the main line and ask for anyone on the exchange team.
Main line
(631) 438-1031General email
info@1031specialists.comMailing address
30262 Crown Valley Pkwy, Suite B 464Laguna Niguel, CA 92677
The information on this page is general in nature and is not tax or legal advice. 1031 Specialists is a qualified intermediary, not a law firm, accounting firm or investment adviser. Consult your own tax and legal advisors about your circumstances before entering into an exchange.